Impacts of globalization on multinational organizations
Discuss about the Globalization and its Impacts on Walmart.
Globalisation has been defined by OECD as the process of dispersion of service on a geographic basis. The dispersion is mainly based on the factors including, distribution, cross border networking and the production process. The process of globalization is related to the ways by which the economies of different countries are linked with each other. Globalization has increased the levels of the interdependency and integration of the organizational processes of different countries. The dynamic nature of globalisation further affects the multinational companies in many ways. The trade based activities across the borders have also increased in the process. Globalization has led to the development of the various brands which have operations in multiple countries (Aksoy, Guriev and Treisman 2018). The usage of the processes like, outsourcing and offshoring of the organizational activities have also increased in the modern global business environment. The labour migration is another major impact of globalization on the large organizations. The labour are sourced by the companies from the lower-income or the middle-income based countries of the world. This helps the companies to reduce their costs and the ways by which they operate in the environment. The profits and revenues of the companies have also increased in the process due to the reduction in the cost of production (Ariely 2018). The infrastructure based costs and the innovation capabilities of the global organizations have increased due to the implementation of globalisation in various processes.
The analysis in the report will thereby be related to the effects of globalisation on process of an organization and its operations in the industry. The increase that has been experienced in the outsourcing based activities of the companies will be a part of the analysis. The effects of the increase of these activities on the profitability of the company will be discussed in the report. The organization that has been considered for the purpose of globalisation based analysis is Walmart. This a multinational retail based company of the American origin (Bamiatzi et al. 2016).
Walmart Inc. is a global company which has its operations in many areas of the world in different forms like, the hypermarkets, discount stores and grocery stores. The organization is headquartered in Bentonville, Arkansas and was founded in the year 1962 by Sam Walton. The company currently owns more than 11,000 stores in 28 countries. The major countries where Walmart has its operations are, Canada, United States, Chile, Japan, India, Brazil and Argentina. The operations of the company are mainly controlled by Walton family who are the founders of Walmart. The highest revenues of the company are earned from the retail market of the United States (Walmart.com. 2018).
Globalisation has led to the increase of competition in the different sectors and industries. The major competition is related to the costs based on the products and the services that are manufactured by the company. The costs related to production have also been reduced by the organizations with the help of cheap labour sourced from the other countries. Globalisation has also created successful links between the various cities, regions and countries (Broner and Ventura 2016).
Strategies adopted by the organization to compete in the global environment
The globalisation based activities have also created successful links between the organizations and the people of different countries of the world. The integration of various types of economies in the world have also led to major changes in the current business environment. The positive effects of globalisation process are based on the increase in the reach of the company towards a huge customer base. The products and the services of the company can now be offered to a wider range of consumers in the whole world (Chilosi and Federico 2016). The improvement of technological capabilities of the company have also increased due to globalisation based activities. The ecommerce platforms that are provided to organizations have been a major reason behind the increase of organizational revenues.
The negative effects that have been caused by globalisation on the multinational corporations are based on the high levels of price changes. The internal employees of the company or the employees who belong to the same country are also affected by the outsourcing based activities of the global companies (Crane and Matten 2016).
The Fortune Magazine has awarded Walmart with the topmost rank in the retail sector among various other multinational retail companies. The demands in the retail market have been increasing steadily over the past few years. The retail stores mainly provide the final product of the entire production process to the customers. The retailers with physical stores have inventory in the different locations. On the other hand, the retailers who do not have any physical store operates on the e-commerce based platforms that are provided to them (Crane, Kawashima and Kawasaki 2016).
Globalisation has affected the operations of Walmart after the establishment of the company. The main concept based on globalisation that has been implemented by Walmart is offering the same standard of products in all the locations in the world. The global and the domestic customers of the company are offered similar products by Walmart. The strategy of “Think globally, act locally” has been applied by Walmart in all the areas of its operations. The new and improved concept stores of Walmart have been opened in various areas which have been named as Walmart Discount Stores (Grossman and Helpman 2015). The organization has thereby applied the concept of differentiating themselves by offering different types of services to the customers in the different stores. The low priced products of Walmart have been a major strength of the company in the different areas of its operations in the entire world. The activities of the company related to supply chain activities are also a major contributor to its success. The different systems that have been implemented by Walmart are mainly radio frequency distribution and customer relationship management (Hay and Marsh 2016).
The organization has launched Wi-Fi based systems which have led to the improvement of the technological capabilities of Walmart. The company has further been successful in creating strong and effective relationships with the communities of the areas in which it operates. Walmart has thereby made use of the huge opportunities that have been provided to the company with respect to the globalisation activities. The expansion of organization on a global basis have been affected the political situation of the countries in which it has the operations. The levels of the loyalty of the customers have acted as a major strength for the successful operations of Walmart globally (Hirst, Thompson and Bromley 2015).
The improvements in the technological environment have also affected the operations of Walmart and led to many significant changes in the company. The products of the company have priced in a manner which will help in attracting the customers. The company had thereby decided to expand its stores in the booming retail industry of China and India. The markets have been successful in providing the highest levels of opportunities to the company (Kilic 2015). The costs related to production of the company have reduced owing to the availability of the low-cost based labour in the emerging countries. The potential of the growth of Walmart has increased with the help of high demands of the products in countries of Asia. The organization has been able to acquire the position of the biggest private employer in United States. The company has thereby been affected positively by the globalisation in the external environment (Kleinert 2018).
The suppliers of Walmart have been the major source of strength for the company in its local and global operations. The company is not dependent on the suppliers for the type of products that are manufactured and supplied to the customers. The suppliers of the company are totally dominated by the demands that are placed by Walmart regarding the supply and manufacture of the products. The supply chain of the company is shaped within the low-cost based structure that has been helpful for the reduction of the overall production costs. This has enabled the company to provide the discounted products to customers (Kilic 2015). The manufacturers of the global operations of Walmart are totally dependent on the company for the ways by which the products are marketed on the global platform. The major demands that are placed by Walmart on their suppliers is based on the low prices and the “just in time” delivery of the goods. The system of delivery has also been quite transparent in nature and the distribution based network has also been set in a successful manner. The suppliers are instructed by the company about the ways by which the products can be manufactured for the successful use of the customers (Hirst, Thompson and Bromley 2015).
The position of the biggest retailer has been acquired by Walmart and the supply chain based costs reduced with the offshoring of jobs. The workers sometimes have to carry the burden of the hidden costs due to the low cost products offered by Walmart. The process of labour contracting has become quite common in the modern environment and the global organizations used this process for the purpose of sourcing labour with low wages. The labour are mainly present at the lowest position in the supply chain of the global companies (Knudstorp et al. 2017). Walmart has provided low wages to the workers in spite of the huge workload that has been taken by them on a regular basis. The main country which has provided the opportunity of labour sourcing to the company is China. The huge population of the country has been a major attraction for the global retail organization. The operations have thereby been outsourced to the country and the merchandize of Walmart are mainly manufactured in China (Kopnina and Blewitt 2018).
The costs of production process have been reduced due to the labour outsourcing activities from China. Walmart is known for leading the process of sourcing low cost labour from China which was later followed by the other companies. The wages provided to the workers in China have also been reduced recently by the company (Lund and Tyson 2018). The procurement based costs of Walmart have decreased in the process. The Chinese suppliers were further pushed by Walmart for lower prices. The workers were provided with wages which were lower than the minimum standards of living. The hours of work of the workers have also been quite high. The company has thereby been able to use the outsourcing based opportunities in the most effective manner (Kovtun and Ignatyuk 2015).
The international and the domestic business process of Walmart has been seen low development in 2013. The organization has thereby closed the operations of greater than 20 stores in China. The low response that has been provided by the customers of this country to the international strategy of Walmart is the main reason behind the failure of the company. The company has faced huge challenges in the countries including, China and India. The response of the customers to the products that are offered by Walmart in the stores of these countries is quite low (Mamedov et al. 2016). The major reason behind the failure of the international strategy of Walmart in these countries is based on the products that are offered by Walmart. The company has been offering similar products to the customers in these areas according to the strategy that has been discussed earlier. The products which have been successful in the US stores of Walmart were not able to impress the customers in China and India. The high-end and expensive look of the stores have also been a major drawback for the operations of Walmart (Monnet 2016). The organization has faced a major challenge related to the ways by which the customers can be impressed in these countries. The quality and the freshness of food have also been a major issue related to purchase of the products in China. The company has thereby failed to recognise the ways by which the products offered in the stores of China and India need to differ from the products that are offered by the company in the United States (Moutsatsos 2018). Walmart had been successful with the application of the concept based on bulk purchase in the United States. On the other hand, the Asian customers mainly prefer to buy the fresh food products. This issue had led to the decrease in the sales and revenues of the stores of Walmart present in China. The local customers of the China had played a major role in providing huge challenges to the largest retailer in the world. The customers of these areas have been hugely affected by the policies that have been implemented by Walmart in the different stores (Mukherjee 2018).
The major issues faced by Walmart in the different Asian operations of the company were mainly related to the lack of proper analysis and understanding of the preferences of the customers in these areas. The company has also failed to analyse the external environment based on the various political, economic and the cultural factors of the countries. The customer preferences in the different cities of the Asian countries have proved to be different as compared to the similar nature and preferences of the US based customers (Steger 2017). The company has thereby tried to analyse the environment in the countries before offering the products in their various stores. The huge opportunities that are provided by the various Asian countries have been the major reason behind the entry of Walmart in these areas. The management of the organization is also trying to enter and further capture the areas so that Walmart can be successful in creating a different position in the industry. The major aim of the company at present is to analyse the demands and the needs of the customers and supply the products accordingly. The stores are also being planned according to the tastes of the huge base of customers who are present in these countries (Stiglitz 2017).
Walmart can be provided with some recommendations which can be helpful for the operations of the company and the mitigation of various challenges faced by the company as well. The various recommendations are,
- The managers of the company can analyse the market and the preferences of the customers. The proper analysis of the demands of the customers can be helpful for the company to design the appropriate products which can suit their needs. The company will thereby be able to create a strong position in the market with the help of the customised products.
- Walmart can also think of entering the market with the help of joining its operations with a local organization. This will provide the company with huge opportunities to understand the needs and demands of the customers who are a part of that country or area. The merger with a local company will be the best way by which Walmart will be successful in fulfilling the demands of the customers by providing them with the highest levels of satisfaction.
- The services that are provided to the customers in the various countries need to be developed according to the levels situation in the country and the external environment.
- The analysis of the external environment can be the most important step for Walmart to create its position in the market in a successful manner.
- Walmart can engage the customers of the local community in the organizational operations so that the awareness of the brands can be created successfully.
Conclusion
The analysis of the report can be concluded by stating that the process of globalisation has immensely affected the various areas of the global business organizations. The different organizational processes are affected by the globalisation related activities. The discussion is mainly based on the analysis of Walmart and the ways by which the company has been affected by globalisation. The strategies that are implemented by the company in different processes are analysed in the report. The globalisation based strategies of Walmart have been successful in some of the areas and in some of the countries the efforts of the company have failed. The company has faced some major issues related to the operations in China and India due to the products that are offered to the customers. The organization has also taken major steps for the purpose of mitigating the challenges that were faced in the different areas of the market. The report has been concluded with the recommendations based on the ways by which the company can create a strong position in the market
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