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The Price-Sensitive Affluents, Wal-Mart has learned (Wal-Mart Annual Reports) is more interested in finding an exceptionally good deal and not necessarily concerned about the shopping experience. This is particularly true as one of the strongest factors influencing the execution of their strategy, the emerging global recession during this timeframe, takes hold. Again as with the Price Value Shopper and the paradoxical purchasing patterns of the Brand Aspirational segment show, the cost savings, accuracy, and quality of products delivered with the Wal-Mart supply chain are much more important in the long run relative to store accoutrements and improvements. Admittedly nearly two dozen superstores are very dated in their decor and layout and do need to be re-vamped (Frazier, 38). Yet as this analysis of the customer segments shows based on Wal-Marts' filings with the Securities and Exchange Commission over time (Wal-Mart Annual Reports), the far greater contributing factor to growing same-store sales performance is concentrating on the supply chain initiatives and strategies delivering new suppliers with innovative new products at prices that cannot be found anywhere else. There is the expectation across all of these three most strategic segments that uneatable prices is the most critically important concern, followed by faster checkout and wider isles (Wal-Mart Annual Reports). Wal-Mart must keep these expectations and requirements in context if they are to overcome this first and most critical challenge of growing same-store sales in their most critically important segments over time.
Human Resources Lack Compliance and Governance
The lack of compliance and governance, and the lack of a Corporate Social Responsibility (CSR) initiative to unify the global Human Resources of Wal-Mart and its suppliers have significantly degraded the brand of the company. Accused of allowing and even promoting its suppliers to use child labor and unethical sourcing practices globally to gain the best possible price (Fishman, 69, 70) Wal-Mart has shown the dark side of their low price leader strategy. There is are also claims of age and gender discrimination in their stores and how they are run, and the use of illegal immigrants hired as cleaning crews to save on healthcare costs (Department of Labor, 2005).
As if these claims were not enough, statistical analysis of the hiring practices of Wal-mart show that there is rampant age and gender discrimination at the department level throughout the company's many stores and locations (Drogin, et.al.) The deliberate strategizing of how to supplant and even replace their own healthcare responsibilities to workers through reducing their hours just enough to get away from the legal liability of providing healthcare but employing them enough to have Medicaid has been documented by the U.S. Government and led to substantial fines for the company as well (Department of Labor, 2005).
In response to these claims, Wal-Mart initially refuted the fact that there was a significant difference in pay scales and promotions for men vs. women in their stores. This has since been proven to be more of a public relations strategy than an actual Human Resources (HR) strategy as shown by the statistical analysis of Dr. Richard Drogin (4, 6-10). Dr. Drogin's analysis shows that even when women have worked nearly a decade for Wal-Mart and have nearly perfect performance records they are routinely passed up for promotions relative to their male counterparts. The Drogin analysis (et.al.) also shows that women have significantly less opportunities to gain senior management positions within the company as well. Based on Dr. Drogin's analysis the difference in Regional Vice President and General Manager salaries showed how dramatically different the acceptance of women are in these ranks of Wal-Mart. Only 10.3% of the Regional VP and GM positions are staffed by women as of the timeframe of this case study. According to the Drogin analysis, (26) women in these positions earn $279,772 versus $419,435 for their male counterparts, over a $139,000 difference. Women it appears in the Wal-Maret culture are destined to be Associates with very few being moved into management positions.
Taking the analysis of HR practices to the store level shows a different aspect of the approach the company relies on to ensure a non-unionized workforce. Combating the entrance of unions, Wal-Mart typically sets the target of full-time workers at 70% of an entire store staff (Department of Labor, 2005). This is consistent with their approach to staffing a typical 24-hour SuperCenter with approximately 450 total employees, which yields on average 315 as full-time associates (Wal-Mart Annual Reports). From the analysis completed by Dr. Drogin (25, 26 -- 30) less than 23% are minorities. Wal-Mart relies on a unique management structure to accomplish this mix of full-time vs. part-time employees. Figure 3, taken from one of the company's Securities and Exchange Commission 10Q filings, show the structure of the company's chain of command. Only after a Support Manager is promoted to Management Trainee are they taken off an hourly wage and given a salary. This is to ensure a greater level of consistency across the hourly wage base and also attain higher levels of profitability across the entire company. According to Dr., Drogin this chain of command also makes it possible for Wal-Mart to selectively promote based on congruence of potential management trainee candidates to the internal culture, which he contends (39, 40) results in a type of discrimination against women that is difficult to track and prove. His analysis however shows this practice, in aggregate, takes place within Wal-Mart throughout the U.S. quite often (Drogin, et.al.)
Figure 3: Wal-Mart's Chain of Command
Source: (Drogin, 22, 23)
Wal-Mart has had to answer to its shareholders, the U.S. Department of Commerce and the U.S. Labor Department about is practices globally in the context of HR practices. Ironically for all the efforts to gain competitive advantages on costs through these activities, Wal-Mart faces the daunting challenge of creating a corporate-wide Corporate Social Responsibility (CSR) strategy that will both satisfy its shareholders and also the U.S. government. Exacerbating this challenge is the role of compliance in the form of Sarbanes-Oxley laws that Wal-Mart must comply with as a publicly-traded company in the U.S. Of all areas of challenge for Wal-Mart this is the potentially most expensive to resolve and the one that requires the culture of the company to change.
Ethnocentrism Rampant In Global Growth Strategies
Wal-Mart's expertise in expansion is well-honed within the U.S. And regions of the world that have comparable economies and cultural values. The use of the Hofstede Cultural Dimensions (Hofstede, et.al.) illustrates why this is. Wal-Mart is not necessarily intentional in this bias; their supply chains require infrastructure and logistics that are found in nations that are comparable to the U.S. In conjunction with this prerequisite, Wal-Mart also standardizes their retail environment for maximum supply chain performance and supply chain efficiencies. The use of supply chain metrics of performance and benchmarking to the retail store level within the Wal-Mart culture necessitates this focus and orientation (Blanchard, Comm, Mathaisel, 166, 167). When all these factors are taken into account in conjunction with the five cultural dimensions as defined by Hofstede, the valuable lessons learned from a failure to establish a successful retail operation in Germany and Korea become clear. Wal-Mart suffers from an ethnocentric mindset when it comes to global expansion that is partially supported by the intensive supply chain and logistics infrastructure needs, but also by the lack of patience for results in global markets significantly different than the U.S. And cultures like it. Analyzing the failures of Wal-Mart in Germany provides an excellent example of the extent to which this happens. Comparing the Wal-Mart expansion strategy prior to and during the Germany expansion relative to Tesco, their dominant global competitor based in the United Kingdom (Child, 134, 135) illustrates how the European-based competitor takes years to study potential global markets for launch of a new store.
In analyzing why Wal-Mart failed in Germany the factors of how different the supply chain practices, systems and approaches are, the disconnect on the value proposition the company used, and the lack of foresight on the merger used to gain access to the market all must be taken into account (Christopherson, 451, 453-455).
Beginning with the significant differences between the German and European-based supply chains relative to the American-based ones, Wal-Mart quickly realized after acquiring a company to gain access to the market that "Big Box" retailing the company had pioneered in the U.S. required an exceptionally high level of supply chain synchronization to succeed. In fact this assumption of supply chain maturity of processes throughout Germany specifically and Europe in general proved to be false (Christopherson, 452). There was little use of analytics on the part of suppliers and no use of CPFR between larger suppliers including the German, French and other European suppliers and Wal-Mart's acquired company in Germany (Christopherson, 467). In essence Wal-Mart's supply chain operations took a significant step backward in terms of overall performance as a result.…[continue]
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