Walmart is among the largest retail companies in the world. Having conquered the market in the United States, the company has embarked on expanding into foreign environments. As a part of its expansion, Walmart joined the Chinese market in 1996. Existing business and human resource management practices were insufficient to please the local business ecosystem. To rectify the tension between then-current business models and actual retailing performance in China, Walmart had to go through decades of strategic adjustments.
Walmart’s initial failure to succeed in the Chinese market was due to its mode of operation and poor regional reception. According to Xie and Cooke (2018), Walmart had operated in “the joint venture mode for the purpose of spreading the financial risk,” while their most significant competitors expanded the networks of “wholly owned stores” (p. 8). Additionally, Walmart’s traditional American style management strategy was not popular due to its “membership fees, centralization of procurement, relatively small varieties of goods, and mismatch of products and customer tastes on account of regional differences” (Xie & Cooke, 2018, p. 8). These factors predicted Walmart’s subpar performance across China. To accommodate the specifics of the Chinese market, Walmart had to reconsider its implementation plan and conduct major changes in the local management.
To amend the damage done to the company’s growth and reputation, Walmart’s Chinese department has appointed a new chief executive officer. Mr. Yaochang Chen was appointed for his knowledge of the realities of the local market (Xie & Cooke, 2018). To reinforce Walmart’s existing competitive advantage, Chen chose the strategy of “store expansion and cost reduction” (Xie & Cooke, 2018, p. 8). As a result of his managerial tactics, the company experienced substantial growth in the Chinese environment. However, newly implemented operation and human resource management practices created a plethora of new challenges, such as poor quality of service, false revenue reporting, and low-quality production.
In conclusion, Walmart’s quest to take over the Chinese market has suffered decades worth of mismanagement. Although presently the company is experiencing constant growth, failing to address the specifics of the local market has cost Walmart massive losses in revenue and reputation. Walmart’s Chinese department has since heavily invested in rectifying these issues and achieved tangible success in doing so. However, the price of the initial failure continues to affect the company’s strategic management in China to this day.
Reference
Xie, Y., & Cooke, F. L. (2018). Quality and cost? The evolution of Walmart’s business strategy and human resource policies and practices in China and their impact (1996–2017). Human Resource Management, 58(5), 521-541.