Executive report on Walmart's organizational case study

Wal-Mart

In the case of Wal-Mart in Mexico, it appears that the greatest issues have already been faced. Some of those issues were overcome simply because the Mexican economy eventually reached a stable position; other issues were overcome by Wal-Mart's purchasing of a significant interest in Cifra, Mexico's homegrown retailer. The case study did not refer to the incident, early in Wal-Mart's experience in Mexico City, when the Mexico City Wal-Mart was unable to receive various local shipments and was subjected to what the author of the article intimates might have been intimidation; the store was forced to reliable even items produced locally and delivered to Wal-Mart by local suppliers.

Virtually all of the previous problems for which Wal-Mart could be held responsible -- high prices, incorrect ordering of stock -- have been rectified. In addition, the Mexican economy has a strengthened. Going forward, there are, however, some remaining problems for Wal-Mart.

Early on, Wal-Mart discovered that in Mexico, its famous hub-and-spoke method of distribution would not work as seamlessly as it does in the United States. Part of the reason is the poor infrastructure, making it difficult or impossible for delivery vehicles to supply stores in a timely manner. This will remain a problem, as Mexico has not completely revamped its road and transportation systems even now.

Short of building roads, there is relatively little Wal-Mart can do about it directly. However, because of its acquisition of Cifra, and with it Cifra's local expertise, Wal-Mart might well be able to use those connections to overcome at least some of the infrastructure problems, and certainly to help overcome cultural barriers.

Wal-Mart was a pioneer in empowering managers and even 'associates' to make decisions and make changes when needed; this is a core competency that can be used now in finding ways to overcome the peculiar Mexican problems of bad roads and other infrastructure failings.

Another core competency is the ability to make do on slim margins of profit in return for expansion. For example, Wal-Mart is willing to close a store for a day, taking that financial bath, and adding to it by lowering prices substantially, in the case of Mexico City, by 16%. This ability is likely to keep Wal-Mart a low-price leader. The fact that Cifra is now an integral part of Wal-Mart will allow Wal-Mart to better understand Mexican consumer and employee requirements. It is difficult to imagine that the Mexican workforce would object to the sort of empowerment for which Wal-Mart is famous. On the other hand, in a culture in which most jobs have been poor jobs, hardly warranting loyalty, Wal-Mart may face an uphill battle in convincing Mexican Wal-Mart associates that they are capable of making decisions and that they will be rewarded for taking the initiative. However, because this sharing of responsibility is so integral to Wal-Mart's culture, it seems that it will be necessary to educate the Mexican workforce in the advantages of such a management attitude.

Key recommendations

The first problem is the infrastructure; with poor roads, it is difficult to employ the hub-and-spoke method of distribution and therefore difficult to deliver to Mexican consumers the same high quality, easily available merchandise Wal-Mart customers in the United States are used to. To fix this, it may be necessary for Wal-Mart to involve itself in politics so that government will be more interested in upgrading the infrastructure. Wal-Mart may, however, have to do it itself, and literally contribute to the building of road in essential portions of its Mexican hub-and-spoke in order to get the job done.