Report: Wal-Mart's Management Approaches in Retail Market

This report analyzes Wal-Mart's management approaches, focusing on ethnocentric, polycentric, and geocentric strategies in the context of its international expansion, particularly its venture into the German market. The report begins with an executive summary and introduction, then provides background on Wal-Mart's business model and its challenges in Germany. It explores the concepts of ethnocentric, polycentric, and geocentric management, discussing their impact on international managers and the need for change management within the organization. The report highlights the importance of adapting to national cultures and values to achieve effective international operations. It discusses the advantages and disadvantages of each approach, and how Wal-Mart's ethnocentric approach contrasted with Germany's cultural and business practices, leading to its failure in the German market. The report concludes by emphasizing the need for companies like Wal-Mart to adopt more flexible and culturally sensitive management strategies to succeed in diverse international markets.

Topic 5: Understanding National Culture

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Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................2
Background to the Company...........................................................................................................4
Understanding the concept of an ‘Ethnocentric’ versus ‘Polycentric’ and ’Geocentric’ approach
to Management................................................................................................................................7
Impact on the international manager’s ability...............................................................................10
Change Management.....................................................................................................................12
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
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Executive Summary
The main purpose of writing this report is to perceive the intended meaning or the concept of
‘poly-centric’, ‘ethnocentric’, and ‘geocentric’ approach to management in the retail market
known as Wal-Mart. This report comprises of the impact on the ability of the manager in
international terms and how the Retail Industry, Wal-Mart must change their approach to
management to work efficiently and effectively across National cultures and distinct values.
Introduction
The competition in the market and expectations of the customers is strengthening the pressures
of the competition on the organization. The organizations are looking forward in an innovative
manner for the efficient methods to meet the customer's demand for the responsive products and
services and prerequisite the customer services and products that meet the customer
requirements. The ignorance to effectively and efficiently meet the demand of the customers can
lead to the loss of a customer to the competitors in the domestic market. Nowadays, the
organizations are intensifying by taking the benefits of the globalization in the areas with the
most strategic benefit to point the established value chain activities. This comprises the
establishment of the organization in different geographical areas. However, it is not required that
the company should be in different geographical areas while adopting similar human resource
management practices, even if the liberal market is economic in the retail market. The practices
of Human Resource like other organizations matter in the performance of the employees and
effectiveness of the retail firm. The firm in the liberal market economy is considered to be
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having more liberty when compared with those in different economies (Ferrell & Ferrell, 2011).
To adapt different HRM practices as long as the companies follow the legal and political
framework of the countries are involved in different firm practices that affect the organizational
citizenship, satisfaction of the employees, the performance of the employee, and the
commitment. That is, the cultural paradigms are not easy to deal with. The culture has been
defined by the Hofstede as the action or process of the mind which distinct the people of a single
entity or group of employees from another. It has also been argued by Hofstede that the value is
contemplated as a core element of any culture which advances or promotes the state of affairs
over others towards a prestigious position. The national culture has been defined by the Hofstede
in five different dimensions known as masculinity versus feminity, power distance,
individualism vs collectivism, uncertainty avoidance, and the short-term and long-term
orientation. The main purpose of writing this report is to perceive the intended meaning or the
concept of ‘poly-centric’, ‘ethnocentric’, and ‘geocentric’ approach to management in the retail
market known as Wal-Mart. This report comprises of the impact on the ability of the manager in
international terms and how the Retail Industry, Wal-Mart must change their approach to
management to work efficiently and effectively across National cultures and distinct values
(Nazarian, et al., 2013).
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Background to the Company
Wal-Mart is a chain of supermarket and retail store and is very successful in the United States of
America. Wal-Mart is successful in many different countries and has decided to sell its Holdings
in Germany in July 2006. Wal-Mart had suffered a loss in the market of Germany. While
establishing itself every year, Wal-Mart has been losing approximately $ 201 million. Thus, it is
required by the Wal-Mart retailing industry to represent and bring the innovative and best
practices in the supply chain management. The Wal-Mart has prospect which has been helping in
transforming the retail Industry and supermarket outside of the local market. The Wal-Mart has
decided to accomplish their goals and objectives in the Canadian, Mexican and U.S market and
has been accredited to its earlier promotion. The Wal-Mart has faced the exit from the German
market base which is of great interest to study and explore. The failure has contributed to
enhancing the literature on the failure of Wal-Mart in expanding money with the expectation of
achieving a profit by putting it into financial property, share, schemes, or by using it to develop
of commerce in the international market. This is because the Wal-Mart has entered the global
market like Germany without actually exploring the information on implementing the strategies
that will help them to beat the competition in the global market through their existing company
size and supply chain. The Wal-Mart includes approximately 1.3 million employees in the
United States headquarter and is considered as largest in the nation. The retail industry, Wal-
Mart has extended their stores in rural and suburban areas by entering into the new market. The
Wal-Mart has entered into the market since 1990 using its control over Logistic and supply
system while effectively maintaining the strategy of cost leadership. As a response to this, the
Wal-Mart capability to expand and succeed outside the country that is the United States of
America has become even more pertinent with the generation of revenues of the company. In
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1990, the Retail Industry Wal-Mart has extended the German market as a stage of the
international expansion strategy (Christopherson, 2007).
The Germany is considered as the third largest retail market in the Global world for which
acknowledge for 15% of Europe after USA and Japan. The retail market Wal-Mart wants to
implement the same strategies which the Wal-Mart has implemented in their domestic market to
influence the market and enter into the International market. However, the Retail Industry, Wal-
Mart has faced obstacles to enter into the third largest retail market in the world that is, the
German market. The retail industry, Wal-Mart has faced comparatively lower position than in
the US and has tried to expand by building the relationship with two comparatively weak chains
of retail market known as Wertkauf and Interspar. It is difficult for the Wal-Mart to change the
existing distribution system due to the market power and the Wal-Mart took on more cost
associated practices to the wholesaling and inventory that the firm is able to achieve in the
United States. The Wal-Mart has implemented the strategy of price based competition with the
hope that they can conquer the German market. The most persistent issue faced by the Wal-Mart,
which has been right from their corporate governance structure. US follows the corporate driven
governance system while Germany follows the corporate driven governance system. That is,
there were correlations of corporate governance of both the countries (host and home country)
industry setups and the standardization in the practices followed. Thus, WalMart had quit the
German market. Also, there were beliefs that the employees of the German are having more
manufacturing and application development skills. That is, Germany considers to have more
engineering and technical skills which was in contrary with the counterparts of the US, which
generally possess marketing skills. The other differences in the nations are the companies of
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German believes in putting more focus in the social interactions and less on generating the
profits. German employees pay attention to the planet and the people which shows that the
German workforce takes the responsibility for stakeholders rather than shareholders. That is, the
German corporate governance pays attention to build long term business partnerships with the
stakeholders and follows the insider system for the company performance. While the corporate
governance is market oriented in the US markets. The competition of Walmart for the
international expansion in the market of Germany is having an impact due to the institutional
framework and the cultural values. The companies of German follow both the ethnocentric as
well as ‘poly-centric’ approach for the management while the companies of US basically rely on
the only ethnocentric approach (Zikargae, 2013).
The significant and continuous process of the retail Industry, Wal-Mart has faced aggressive
losses due to the rising competition, which is responsible to mark the expansion of the Wal-Mart
as ‘failure’. In Germany, the Wal-Mart has lack success, which was associated with resources
that Wal-Mart has hired to extend in the German market, and its inability to evaluate the benefits
of those resources which is very different from the circumstances of the USA.
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Understanding the concept of an ‘Ethnocentric’ versus ‘Polycentric’ and ’Geocentric’
approach to Management
The retail Industries like the Wal-Mart and small and medium-sized organizations expand in the
international market due to the advancement in the technologies and increase in globalization.
This International expansion includes setting up production facilities and sales offices in
international countries. The types of the approaches of staffing policy implemented by the
organization in international human resource management are geocentric staffing, ethnocentric
staffing, and poly-centric staffing. The organization may be persuaded to adapt the ethnocentric
approach to human resource practices to avoid the identified risks in the new setup in the
international market or while building the new ventures. The ethnocentric organizations like
Wal-Mart hires the expatriate to implement the rules and practices in international market to
make it match with their domestic or local market. The ethnocentric approach is best acceptable
by the organizations when the employees from the home country are sent to the new
geographical areas to help and direct the resources in international countries due to their
experience and professional skills. The ethnocentric approach is contemplated as the staffing
policy that is utilized by the firms that has cost strategic orientation relevant to the international
market. The ethnocentric approach is generally implemented by the headquarters of the company
by sending the employees from home or parent country (MacDonald, 2017). The main advantage
of ethnocentric approach is that it provides assurance that the employees at the higher level
management or top level are skilled and professional enough in the retail market. This helps in
matching the goals of the organization by providing the part of the continuous sequence of
operations of the extension of Walmart in different country like Germany, where Germany does
not have better suited skilled and professional employees for staffing and authority set operations
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of the retail market like Walmart. This policy makes sure that the unified culture is followed by
the organization instead of the diversified culture. The drawback of the ethnocentric approach is
that it does not have adequate availability of the assistance to transfer the skilled knowledge of
the local market to the international market. This approach may also build a barrier in the home
nation from promoting in the organization (Whitehead, 2017).
Poly-centric approach is the policy for the management of the global market, which is integrated
in hiring and promoting the employees who are actually the citizens of the host country in which
the organization want to offer the services. The approach and policy are best matched to maintain
the lowest cost. The firm may continue to run smoothly and the communication between the
employees and the organization is easier due to the fact that the employees are all related to their
home or geographic location. The poly-centric approach is having control for maintaining the
employees of the organization from the same geographical areas. The poly-centric approach
main benefit is that it assist in the learning of the firm in the home nation. This policy also brings
the opportunities for home country employees to upgrade and enhance their careers to get
promoted. However, the poly-centric policy does not comprise of the central positions or
Corporate positions and is just limited to the key positions. The main drawback of the poly-
centric policy approach is that it may bring a gap between the managers in the host country and
managers in the home country due to the professionalism in the knowledge and skills (Nanda &
Kumar, 2012).
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The geocentric approach is implemented by the organizations like the retail market, Wal-Mart
when they are required to implement a transnational orientation. The employees are selected in
the geocentric approach regardless of their geographical location rather than perpetuating the
group of people from their home nation to the host nation. In the geocentric approach, the skilled
and professional resources are selected by building a strong unifying network management. The
Walmart should follow the immigration policy and must take this into consideration to recruit the
resources from distinct countries. In the geocentric approach, the locations and laws are the key
factors in the approach to expand in the international countries. The distributing and assigning of
the job positions to the employees who are having skills are the best match for the proposed
designation regardless of the background of the employees country culture or country origin. The
main advantage of the geocentric approach is its flexibility which assists in enhancing the
knowledge related to cultural traditions of the organization and about the market and different
countries. The main disadvantage of geocentric approach and policy is that it is difficult and
complex to implement. The educational cost of a worker diversity management and immigration
policies may build pressure on the international Human Resource Management (Minor, 2012).
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Impact on the international manager’s ability
There are various cross cultural problems in the business management. The major challenge is
the ambiguity in which culture stipulate the employees with different methods of thinking, like
the ways of growing, listening, and interpreting the international market. The ambiguity is
generally related to the actions and procedures of communication when the employees do not
fully consider the circumstances of the culture of the domestic country as well as the culture of
the host country. This is caused due to the difference in the languages and thus, the potential for
misunderstandings increases (Vella, 2018). Therefore, the employees may frequently behave in a
particular way to assume different things due to the difference in the cultural values and unaware
of the language and the communication style that they don't take the tension on awareness of the
standard system or the principles of the other cultures. This communication arises a situation
where the employees may fail some elements of the communication which needs to be
effectively delivered. Cultural paradigms come with inflexible stance to neglect and experience
the exposure. This brings an outcome of introvert behavior and the mindset which results in the
impression that the host country employees may not be expecting the principles of the Walmart.
This also leads to missing out adjustments to the experience about the new culture search for
behavior which may deteriorate the relationship and may dampen the group of employees
consciously or unconsciously. Thus, the employees need to be aware of their perceptions, values,
behavior, belief depending upon the cultural basis, so that to allow them to come the cultural
perspective (Erlbeck, 2009).
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The cross cultural communication is considered as the most pertinent challenge. The
ethnocentrism is contemplated as unconscious behavior which is difficult to avoid in advance. It
is the supposition that culture of the home country is rational and right, and the other countries
in the international market are inferior. When the ethnocentrism is challenged and confronted
with different culture, the employees try to judge it well with their own beliefs and values and do
not try to identify the culture from the viewpoint of the host country. The specific point of this is
also exemplified by judgement, selective listening value, which affect the quality of the
communication (Lee & Kang, 2016). Also, the distinct culture comprises of distinct perspectives
with important workplace problems like respect for authority, teamwork, time management, and
the responsibility. The other problems are the conflicting ethics or methods of communication to
receive interpretation of transparency and give feedback to the employees work on the diverse
belief systems along with the conflicting stance which are responsible for creating the barriers.
These barriers need to be avoided so as to work effectively and harmoniously to meet each
employee value. It is important to address all the problems. Thus, the managers need to work
effectively with the employees who are from different cultural paradigm and the managers must
know how the cultural impact on other employees and need to be aware of their own culture. The
manager need to comprehend the style of communication as per the culture and the Hofstede
dimension in which the manager or top level management or the higher authorities interacts with
society comprising of politics, religion, beliefs, and family, etc. The higher authority or managers
also need to build right competence, cultural flexibility, tolerance for ambiguity, and reduced
ethnocentrism by gaining the exposure to culture paradigms in international countries and
enabling the active feedback which is important to build the above mentioned competencies
(Malik, 2015).
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