Case analysis of Walmart retail operations

WMT

Wal-Mart faces significant challenges in the Chinese market. There are many barriers to trade and issues that constrain the company from using tactics that proved successful in the United States. As a result, the company needs to balance being able to follow the classic Wal-Mart business model with being able to handle the unique characteristics of the Chinese market. Faced with these strategic challenges, Wal-Mart needs to have a human resources strategy that supports being able to meet its strategic objectives in China.

Recruiting

The first issues is with recruiting. Wal-Mart aims to have a low cost workforce, implying low wages and flexibility on hours. In China, unemployment in 2005 is at 4.2% and has frequently been lower in recent years, which pushes up wages (Trading Economics, 2015). While there are millions of potential workers who are coming from the agricultural sector, where wages are often barely above subsistence, wage inflation is especially strong in the wealthier areas where Wal-Mart would want to situate its stores. This will pose a recruiting challenge for the company.

Furthermore, Wal-Mart relies on its managerial talent for a large part of its success; it is a very well-run company. The problem is that unlike American business schools, Chinese business schools do not turn out a lot of high-quality managers. Often, Chinese companies are forced to import managers from Taiwan or Hong Kong (Yang, 2015). This would not be an issue if Wal-Mart could simply send Americans over, but as the company is struggling with China-specific challenges, it needs to have Chinese managers. The better Wal-Mart is at recruiting, the lower is turnover will be and the more it will be able to build institutional knowledge that blends the Wal-Mart systems with the PRC way of doing things (Sanford, 2005).

Recruiting such talent will be difficult, so the company may also wish to consider setting up training and education programs to develop its managerial talent in-house, blending the company's proprietary tactics with elements of doing business in China. Whatever its strategy, Wal-Mart needs a strong managerial pipeline in order to support its growth ambitions in China, and these managers need to be able to work effectively in the Chinese business environment.

Expats

Wal-Mart may be able to import some of its own people. Where there are deviations from how Wal-Mart would normally do business -- such as with fresh fish -- the company will need to have oversight from head office. Furthermore, many of the problems that the company has experienced to this point may well have been avoided if it had more of its own people in China, instead of relying on the joint venture partner to supply the talent. There are challenges in sending expats, especially to a challenging place like China, but there is an extensive body of research on the traits of managers who are likely to succeed in overseas assignments (Caliguri, 2000).

Training

Training is definitely an area where Wal-Mart can deliver better performance in China. The company is still fairly new to the country, but it will need a talent pipeline in order to continue to grow. This means setting up a training program to build managerial skills among its workforce and identify potential managerial candidates. The training program should identify key needs -- such as improving logistics, or developing new store managers -- and then the program could be designed in such a way that the company will be able to meet its needs.

Alternatives

Wal-Mart needs to continue to improve its operations in China, in order to effectively compete in this challenging market. There are a number of alternatives to do this. The company is presently in a joint venture, and the JV partner provides a lot of the managerial talent. One alternative is to maintain the status quo, something that recognizes the need for a local partner to smooth over some of the difficulties with local governments. The downside of this alternative is that the local partnership has not been an overwhelming success, and other companies like Carrefour appear to be more successful. This alternative likely involves more expats who can assist the joint venture partner on the finer points of Wal-Mart's business strategy.

The second alternative is for Wal-Mart to end the joint venture, buying out the subsidiary and running it themselves. The company's systems are its strength, and there is an argument to be made that Wal-Mart needs to get more of its own people over to the PRC in order to better impose the company's systems in that market. Starbucks has recently adopted this strategy, buying back stores from its JV partner in order to gain more managerial control over its operations in the country (Tang, 2011). Wal-Mart would then hire and train its own people.

A third alternative is to make adjustments to the current strategy. Wal-Mart can work with the partner, to gain knowledge about why their present tactics in China are not working as well as they had hoped. This would mean setting up its own hiring and training programs, something that can help it to have more managerial control, and ensure that there is sufficient managerial talent to expand, without the problems that the company has encountered thus far.

Recommendation

It is recommended that Wal-Mart should continue to work with the partner, but should have more influence over human resources. There should be more Americans in China, working at a high level. Also, it is recommended that Wal-Mart take training into its own hands, so that it has a strong pipeline of managers to support future growth, and to effectively balance Wal-Mart's managerial tactics with knowledge of the Chinese market.