Background of Wal-Mart
Discuss about the Case of Iranian Private Sector Organisations.
The customer expectations and the market competition are intensifying the competitive pressures on the organizations. In response to this, the organizations are progressively looking for the efficient ways to meet the demands of the customers for the stipulation of customized and responsive services and products that meet their requirements. Negligence to efficiently and effectively meeting the requirements of the customer can ensue in a loss of a customer to the competitors in the same market. The organizations are nowadays increasingly taking advantage of the globalization in locations with the most strategic advantage to locate the value chain activities. This includes establishing the company in different geographical locations. However, it is not necessarily the fact that the company or same retail market in different geographical location will adopt similar HRM practices, even if the retail market are located in liberal market economically. The human resource practices like other companies matter in the performance and effectiveness of the retail market. The organizations in the liberal market economy are having more liberty than those in various different economics to adjust from different HRM practices as long as the company is following the political and legal framework of the nation involved. However, the selection of such practices can be influenced through the differences in the cultural environment of different market economics following legal framework. The prominence of the organization’s human resource management practices remain in their capacity to impact different work practices that affect the satisfaction of the employees, organizational citizenship, and commitment, the performance of the employee. That is, culture is a not easy to deal with in order to understand the word and to define it. The Hofstede defines culture as the process or action of the mind which differentiate the people of one category or group of people from another. Hofstede also argues that the value is considered as an inner segment of any culture which prefers certain states of affairs over others. Hofstede has defined the national culture in 5 dimensions known as power distance, masculinity vs. feminity, uncertainty avoidance, individualism vs. collectivism, and the short term and long term orientation. This primary aim of writing this report is to understand the concept of ethnocentric vs. polycentric and geocentric approach to management in the Wal-Mart organization. This report also includes the impact on the manager’s ability in international terms and the how the Wal-Mart must change its management approach to work effectively across national cultures and different values(Nazarian, et al., 2013).
Types of Staffing Policy in International Human Resource Management
Wal-Mart is very successful in the United States and is a chain of retail stores and supermarket. Wal-Mart is successful in many different nations and in July 2006, the Wal-Mart decided to sell its Holdings in Germany. Wal-Mart had incurred a loss in the German market in establishing itself. Wal-Mart every year has been losing approximately $ 199 million. Wal-Mart represent the best practice in supply chain management is among the worlds largest firms which. The Wal-Mart has an excellent candidate which has been effective in moving into the market outside of the domestic nation. The Wal-Mart accomplishment of the aim in the Mexican, Canadian, and US markets has been ascribed to its early promotion, but the exit of the Wal-Mart from the German market is of interest because it contributes to extending literature on the ‘failure’ in the investment in international market despite the reach of its supply chain and company size in the global market. The Wal-Mart comprises approximately 1.2 million resources in their US headquarter and is largest in the nation. Wal-Mart has expanded by developing the new stores in suburban and rural locations. Since 1990, the Wal-Mart has been entered into the urban market using its control over suppliers and logistic system to maintain cost leadership strategy. As a result, the Wal-Mart capability to succeed and expansion outside the nation that is the USA has become even more prominent with the profits of the company. In the end of the year 1990’s, Wal-Mart has expanded in the market of the German as a phase of its International expansion strategy. The third largest retail market in the world is German accounting for 15% of Europe, after Japan and USA. The Wal-Mart has used the same strategies to influence the market in its International expansion. However, the Wal-Mart has identified that it faces some barriers to entering the German market. The Wal-Mart has begun from a relatively weak position in the German market by making an alliance with two relatively weak chains known as Wertkauf and Interspar. To alter the existing distribution system, the Wal-Mart is not having the market power and thus Wal-Mart took on the extra cost related to the inventory and wholesaling that the company is able to achieve in the United States. Wal-Mart has hoped to use the strategy of price based competition to conquer the German market(Christopherson, 2007). The most significant problem faced by the Wal-Mart, however, rose from within its structure of corporate governance that of international trade companies which are owned by the shareholders such as pension funds with short term objectives. The continuous and significant losses of the Wal-Mart and the continued aggressive attitude of the competition were responsible to halt the expansion of the Wal-Mart in Germany. The lack of success of the Wal-Mart in the Germany was associated with the employees that Wal-Mart has hired to expand into the German market and its inability to identify the advantages of those employees which is very distinct from the context of the USA.
Ethnocentric Staffing Policy
Small and large scale businesses like the Wal-Mart retail business expands in the global market due to increasing globalization and improvement in technology. This expansion comprises of sales offices and setting up production facilities in different nations. The types of staffing policy or the approaches the companies implement in international human resource management are ethnocentric staffing, geocentric staffing and polycentric staffing. (MacDonald, 2017).
The company may be enticed to adjust ethnocentric approach to HR practices to eliminate the identified risk in new ventures. The ethnocentric firms like Wal-Mart hire the expatriates to enforce the practices and rules in different nation same as to their domestic country. The ethnocentric approach is best suited when the employees from the domestic country are sent to the new geographical location to assist and direct the employees in another country due to their experience. The ethnocentric approach is considered as a staffing policy that is used by the organization that has primary strategic orientation related to the international market(Zikargae, 2013). The ethnocentric approach is generally adopted by the company headquarters by sending the resources from the parent or home country to the host country. The main benefit of ethnocentric approach is that it ensures that the resources at the top level are professional and skilled enough in the retail market. This is best suited in providing the inline example of the expansion of Wal-Mart in Germany, where Germany does not have enough professional and skilled employees for staffing top positions of Wal-Mart. This policy also ensures that the unified culture is followed by the firm instead of diversified culture. The disadvantage of the ethnocentric approach is that it does not provide the assistance to transfer local knowledge to the firm. This approach may also create an obstacle in the domestic market from promoting in the company. (Minor, 2012).
A polycentric approach to the management of the international market is the policy which is involved in promoting and hiring the resources who are the citizens of the international country in which the company want to operate. The policy and the approach are best suited to maintain the lowest cost. The companies may run smoothly and communication is easier due to the fact that the resources are all associated with their geographic location. The polycentric approach is responsible for maintaining the resources from the same geographical location. The polycentric approach main advantage is that helps in the learning of the organization in the domestic market. This policy also stipulates the opportunities for domestic resources to ameliorate their careers through promotion. However, this does not include the corporate or central positions and is limited to key positions. The main disadvantage of the polycentric staffing policy approach is that it could build gap between the managers in the domestic country and the managers in the international market due to the skills and knowledge. (Whitehead, 2017).
Polycentric Staffing Policy
The geocentric approach is used by the companies like the Walmart when they need to implement a transnational orientation. In the geocentric approach, the resources are selected regardless of their geographical location rather than maintaining the group of people or transferring the people from the parent country of the host country. In this approach, the best employees are selected while developing a strong unifying network management. The retail market like the Wal-Mart should take into this consideration and must follow the immigration policy to recruit the employees from certain countries. In the geocentric approach, the laws and locations are the key aspectsin the approach to International expansion(CRAM, 2013). The geocentric approach helps in assigning the job positions to the resource which is best matched for the hiring designation regardless of the background of the personnel country or culture or the origin. The primary benefit of the geocentric approach is its flexibility. It helps in increasing the cultural knowledge of the organization about the different countries and the market. The main drawback of geocentric policy is that it could be complex to implement. The diversity management, cost of a worker, education and immigration policies may create pressure on the human resource management.
There are numerous cross cultural challenges in the business management. The major issue is the ambiguity in which culture provides the resources with different ways of thinking like the ways of listening, viewing and interpreting the world. Ambiguity generally enters the process of communication when the resources do not fully comprehend the context of the culture of the host country as well as the culture of the domestic country. This is caused due to the language difference. The potential for misunderstanding increases. Thus, the resources may tend to assume different things due to unawareness of difference in the cultural values and the communication style and they don’t take cognizance of the principles and standard system of the other cultures. This miscommunication may result in a situation where the resource not only fail some segment of the communication, but may also build a perspective on the information that needs to be delivered.
The other major issue in the cross cultural communication when some resources enter a different cultural context is the inflexible attitude in order to experience and neglect the exposure. This resulted in the mindset and introvert behavior which leads to the impression that the host country resources may not be accepting of the Wal-Mart. This leads to missing out adapting the new cultures and experiences to learn about the new culture. Such behavior may detoriate the business relationship and dampens the teams unconsciously or consciously. Thus, the resources need to be aware of the cultural basis of their values, perception, beliefs, and behavior, to allow them to check any converse from the cultural perspective.
Geocentric Staffing Policy
The ethnocentrism is the other major issue in the cross cultural communication. The ethnocentrism is the assumption that the other cultures are inferior and the culture of the domestic country is right and rational. Since ethnocentrism is also considered as unconscious behavior, it is complex to avoid in advance. When the ethnocentrism is confronted and challenged with a distinct culture, the resources try to judge it with reference to their own values and do not try to evaluate the innovative culture from the host country view Point. The specific area of the resources is also exemplified by value, judgment selective listening, which impact the quality of the communication.(Lee & Kang, 2016).
The different culture includes different perspective on prominent workplace issues like teamwork, respect for authority, responsibility and time management. The other issues are the methods of communication, conflicting ethics, interpretation of transparency, and reluctance to receive and give feedback. When the resources work on the diverse belief system along with conflicting attitude, the obstacles are created. These obstacles need to be divided in order to run theorganization harmoniously and effectively. The goal of addressing the issues is to make each resource valued(AMA, 2018).
Thus, to make the managers work effectively with the resources who are different in culture, the managers need to be aware of their own culture and how the cultural impact on other resources. The managers need to understand the communication style, the cultural values as per the Hofstede dimension in which the management interacts with society, including family, politics, beliefs, religions, etc. The manager also needs to develop right competencies with a tolerance for ambiguity, cultural flexibility, and reduced ethnocentrism by enabling the active feedback and gaining the exposure to international culture which is crucial to develop the aforementioned competencies(Malik, 2015).
To work effectively across different national cultures and values, the management needs to change their strategies. The Wal-Mart need to change their management as one of the notable reasons behind the incompetency of Wal-Mart in the Germany is the United States top managerial behavior with expatriate associated to the replacement of the managers and the force full implementation of values on both the expatriate managers and the host country(Peterson, 2015). These implementations resulted in the processes of the legal actions in German courts due to the violation of human freedom right. The failure of the Wal-Mart in the German market was invertible and was the outcome of ignorance and cross cultural management of the Wal-Mart. Thus, the Wal-Mart needs to implement the innovative business strategies and restructure the German competitive market. As the Wal-Mart faces the failure in Germany due to the institutional differences and certain cultural differences which are external in Germany and the US, the hr managers had not considered the cultural values and setup of adoption of the local employees and had tried to implement the remote practices in Germany. In order to eliminate such failures in the future, the higher authorities of the Wal-Mart should go for careful investigation of the market in the Germany and modify the practices of the organization according to the environment of global nation. Although the company and corporate culture are almost similar, but even the Wal-Mart can have the impact of national culture like US culture at Wal-Mart so that there should have transformed culture related with the attributes of German culture. The Other prominent factor is the unionization of the organization in the German market so it should not have neglected the employees of the German who are represented as collectivist society should be permitted for the process of unionization and promotion to avoid the legal process (Heller, 2014). The human freedom should be given up the importance along with the local ethical values of German people. The different employment ways should be included to the domestic nation in order to get the positive stance of the German people for substitution of the nationals with expatriate who should be considered as prominent need(Alkhatib, 2017). The Wal-Mart should not also underestimate or neglect the German country for another country or host country by force while planning the international business and there should be given consistently prominence to the domestic working exercises or activities in order to make the business expansion in the new environment. Instead of the standardization of the activities and exercises in the environment, the adoptions to the local setups are better option which is totally distinct in domestic as well as host country. (Ijose & Iossifova, 2015).
Cross-Cultural Challenges in Business Management
Conclusion
This report scrutinizes that the national culture is a prominent aspect of the adoption and conception of Human Resource Management practices. The Wal-Mart provided an appropriate field to study the impact on organizational practices and cultural forces as the interaction between employees and culture assist to comprehend the adoption of organizational practices. The interaction between the organizational practices and cultural dimensions helps to understand the role which the culture plays. It suggests that the adoption of the practices of the organization entirely lacking of the effect of national culture and is not a unilateral top-down process. This study also suggests that National culture plays a prominent function in comprehending the adoption and diffusion of exercises of the organization that the Wal-Mart need to pay special intentness to. It has been found in this report that the series of actions of successfully implementing the practices of the organization should comprise the identification that resources bring their norms and cultural ethics with them to the firm even in the particular function of intense economics and political transformations. The indispensable or intrinsic nature of the institutional reform does not make it easy for the Wal-Mart US based to transfer their practices to the German subsidiary. It has also been found in the report that the culture may have an intense effect on the practices of the organization than an economic system, political events, organizational field and government institutions.
References
Alkhatib, B., 2017. Business Strategy of Walmart and change management, Available at: https://www.academia.edu/10806496/Business_Strategy_of_Walmart_and_change_management
AMA, 2018. Managing Cultural Diversity, Available at: https://www.amanet.org/training/articles/managing-cultural-diversity.aspx
Christopherson, S., 2007. Barriers to ‘US style’ lean retailing: the case of Wal-Mart’s failure in Germany. Journal of Economic Geography, Volume 7, p. 451–469.
CRAM, 2013. Polycentric, Ethnocentric, and Geocentric Approach to International Management, Available at: https://www.cram.com/essay/Polycentric-Ethnocentric-And-Geocentric-Approach-To/PKBNH83XC
Heller, L., 2014. Change Comes To Walmart, Available at: https://www.forbes.com/sites/lauraheller/2014/07/25/change-comes-to-walmart/#df82b8d96723
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MacDonald, L., 2017. In What Ways Does an Ethnocentric Approach Affect HR?, Available at: https://smallbusiness.chron.com/ways-ethnocentric-approach-affect-hr-66946.html
Malik, S., 2015. How to Overcome the Major Challenges in Cross Cultural Communication, Available at: https://www.linkedin.com/pulse/how-overcome-major-challenges-cross-cultural-iim-shillong-pgpex
Minor, M., 2012. The Ethnocentric or the Geocentric Global Corporation: The performance question, Available at: https://www.myucwest.ca/attachments/a.farrell/files/MBA522_Minor_Mike.pdf
Nazarian, A., Irani, Z. & Ali, M., 2013. The Relationship between National Culture and Organisational Culture: The Case of Iranian Private Sector Organisations. Journal of Economics, Business and Management, 1(1), pp. 1-5.
Peterson, H., 2015. Walmart is making 2 major changes to its stores, Available at: https://www.businessinsider.in/Walmart-is-making-2-major-changes-to-its-stores/articleshow/49544882.cms
Whitehead, S., 2017. Staffing Policy & HRM Issues in International Business, Available at: https://panmore.com/staffing-policy-hrm-issues-in-international-business
Zikargae, M., 2013. The Impacts of Ethnocentrism and Stereotype on Inter-Cultural Relations of Ethiopian Higher Education Students. Online Journal of Communication and Media Technologies, 3(4), pp. 1-23.
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