Wal-Mart's Worldly Mindset Failure in China and Japan

Introduction: Globalization and the Challenge of Worldliness

As a result of globalization and trade liberalization, more and more organizations are finding it easier to operate internationally. Success from such international operations does not, however, come easy — organizations are forced to restructure their operations and redesign their products and services in such a way that they are able to respond to the needs of their increasingly diverse client base. People in different countries have different cultures, values, beliefs, customs, and habits. In order to thrive in foreign markets, organizations need to be aware of these differences and ensure that they are effectively captured in their organizational structures and product designs. This appreciation for diversity within other cultures is referred to as "worldliness," and is increasingly being adopted as a source of competitive advantage for businesses operating globally.

Wal-Mart, the world's largest retailer, is perhaps the best reflection of the concept of worldliness in management. Headquartered in Bentonville, Arkansas, Wal-Mart grew from a small discount store in 1962 into the world's largest company, operating in over 70 countries and generating over $250 billion in revenues every year. The company operates three types of outlets — Wal-Mart stores, Sam's Clubs, and Wal-Mart Supercenters — all guided by the core mission of saving people money so they can live better. Approximately one-fifth of its annual revenue stems from its international activity, and it is believed that this success is due, in part, to the company's effectiveness in responding to the diverse needs of its customers (Gereffi & Ong, 2007).

The company has, however, not had a smooth run in implementing its growth strategy. The "Everyday Low Prices" concept, upon which its operations are based, has proven successful in some markets such as Canada and Mexico, but has been a total failure in others such as Indonesia and South Korea (Gereffi & Ong, 2007). In the Chinese and Japanese markets, the company has continued to struggle to establish its presence, almost five years since it first ventured there. These mixed outcomes demonstrate that the company's success formula in different markets is far from perfect. This paper analyzes Wal-Mart's entry strategy into the Chinese and Japanese markets with the aim of showing that much of its poor performance in foreign markets stems from its failure to adopt a worldly mindset, and that its overall profitability could be improved if more resources were committed to research aimed at understanding the cultures of potential markets and their effects on the competitive environment.

The Five Minds of a Manager

Gosling and Mintzberg posit that, given the rapid evolution of technology and the increasing volatility of the global marketplace, it is crucial for managers to develop effective managerial skills that enable them to make the right decisions for their organizations. They argue that in order to be an effective manager, one needs to master the art of thinking — that is, reflecting — before acting (Changing Winds, 2011). Failure to do so results in thoughtlessness, which can be costly to an organization. Managers therefore need to merge action and reflection, functioning at the point where practical doing meets reflective thinking. Moreover, they must be able to enroll people to help implement and actualize the decisions they make, and must have the skill to build and maintain effective relationships so that people are able to function effectively. In other words, managers need to cultivate five distinct mindsets:

A Reflective Mindset: Managers need to be able to gauge the future based on their own past experiences. They ought to derive meaning from those experiences and, from them, develop options for responding to issues emerging in the world around them — both currently and in the future (Changing Winds, 2011).

An Action Mindset: Just as horses pull a chariot in the direction they desire, managers ought to pull their people toward a common vision and keep them moving in that direction by providing a favorable environment that enables them to realize their hopes and aspirations (Changing Winds, 2011).

A Collaborative Mindset: Managers must recognize that people play a crucial role in the actualization of an organization's objectives. As such, they must put in place comprehensive systems to ensure that employees are well-engaged and that effective manager-employee relations are built and maintained (Changing Winds, 2011).

An Analytical Mindset: Managers need to recognize that the organization works like a system, made up of various structures, techniques, departments, and physical assets. It is the manager's role to bind these components together through vision and organizational values so that they are able to work together effectively (Changing Winds, 2011).

A Worldly Mindset: Managers must not run their organizations guided by a global mindset that yearns for uniformity and consistency. Rather, they need to adopt a worldly mindset that delves into the customs, habits, and cultures of people, and structures operations based on the unique and specific conditions that characterize a specific group (Changing Winds, 2011). For a global business, worldliness means recognizing the cultural differences between countries and developing unique ways of responding to their different needs. What may be an element of success in the United States may not necessarily work in another country whose values, habits, and customs differ from those of Americans.

Wal-Mart's Application of the Worldly Mindset

Wal-Mart is one of the many companies that focus more on the global aspect and less on the worldly aspect of growth, as framed by Gosling and Mintzberg. This has proven quite costly, causing the company to perform poorly in some of the most promising markets. The Chinese and Japanese cultures are, for instance, substantially different from American culture, yet the company still carried most of its U.S. practices over to its branches in China and Japan when it ventured there. Instead of adapting its operations to respond to these new cultures, the company wrongly assumed that new consumers would readily adapt to its way of doing things.

Conclusion

Worldliness is increasingly being recognized as a source of competitive advantage for businesses operating globally. It essentially means a heightened ability to appreciate diversity within cultures and respond effectively to the unique needs of different markets. Wal-Mart, the world's largest retailer, currently operates in over 70 countries — but despite its strong geographical presence, it continues to face difficulty establishing itself in the Japanese and Chinese markets. This is largely because the company focuses more on the global aspect and less on the worldly aspect of growth, making it difficult to meet the unique needs of different markets. There is a need for the company to commit more resources to research aimed at understanding the cultures of potential markets and their effects on the competitive environment. Only then will it be able to venture successfully into new markets.

References

Changing Winds. (2011). The five minds of a manager: Insights from Mintzberg and Gosling. Changing Winds. Retrieved 3 April 2015 from

Gereffi, G., & Ong, R. (2007). Wal-Mart in China: Can the world's largest retailer succeed in the world's most populous country? Harvard Asia Pacific Review, 9(1), 46–49.

McKinsey Consumer & Shopping Insights. (2012). Luxury without borders: China's new class of shoppers take on the world. McKinsey Consumer & Shopping Insights.