Walmart's Relationship with Its Organisational Environment

Wal-Mart has been in business since 1962, founded by Sam Walton. It started as a small discount chain and grew to the largest retail organization in US. The company has struggled to maintain a positive image and has often had to deal with hostility and opposition along with bad press. It has a reputation of paying low wage, driving small retailers out of business and does not encourage unions in their organization (Petrovic & Hamilton, 2006).

Wal-mart is built on being the best in retailer and customer service, it is the largest employer and generates most sales and most is diversified in the retail industry. Wal-mart operates stores outside of America however despite the resources it has, it has not been successful in establishing itself in all the markets it has moved to.

This essay will look at Wal-mart's relationship with the environment and their ability to influence the environment as well as how they react to the environment forces imposed on them.

Wal-mart has been seen as the largest retail giant globally and has stores across several countries. How does Wal-mart grew to the size it is now? While Wal-mart is successful in a number of countries they are not so in all the countries they tried to move into.

Environmental contingency theory

Hatch and Cunlife (2006) stated that organizational success is dependent on the organizational fit with the environment internally and externally. Wal-mart has the choice of three crucial strategies when they want to succeed abroad, especially in China, the three strategies are to go global, go native and go up-market (Gereffi & Christian, 2009).

Govindarajan & Gupta (2001) have stated the only way for Wal-mart to win local battles internationally is to adapt to the landscape and to balance customer demands with their core business models. The culture in China and their dynamics differ from America. The strategy of local adaptability in China is required for success. As a capitalist, Wal-mart has to shed its discount label and target the emerging middle class of China, therefore they have to change thyeir basic profile and go up-market (Gereffi & Ong, 2007).

To be successful Wal-mart has made adjustments for china markets, from the layouts to factory management practices (Gereffi & Ong, 2007). Although Wal-mart is robust in its supplier network it faces challenges in China distribution channels which limited its expansion. As the infrastructure in China is not well developed it has created much problem for distribution; and the Chinese suppliers had a hard time keeping up to Wal-mart's demanding supply chain standards. Despite the challenges Wal-mart received good feedback from Chinese shoppers who like their localization strategies and stores layout (Gereffi & Christian, 2009) and in China Wal-mart has come to symbolize modernization and globalization.

Wal-mart faced political restrictions in China that limited their stores to certain cities and areas but they did not lose heart, now those rules have been relax, they are able to go into china to open stores and now employ 150,000 staff (Gereffi & Ong, 2007).

As shown in the example above, Wal-mart's expansions overseas are not all smooth process. They pulled out from Germany, suffering from lose of great amount of funds. Wal-mart wasn't able to change their business model to cater to Germany's regulatory environment and social norms layout (Gereffi & Christian, 2009). They do not accept nor allow union in their organization which is a requirement in Germany. And Wal-mart faces additional cultural and market challenges in South Korea that limit its success. Wal-mart is not able to attract Korean shoppers with its bare-bones warehouse retail style, and Korea's distribution channels are weak.

Tilly (2007) stated that Wal-mart has to adapt to the local market to make its offerings truly relevant to the local culture and political system when they want to transplant new concept to foreign land. Despite Wal-mart's success in its supply chain distribution it's not flexible to accommodate to foreign local culture, shopping habits and political requirements, and there are limits to how they bring in their ideas and concept to the countries.

Inter-organizational networks

Wal-mart works closely with a network of suppliers and distributors in their supplier chain. They deconstruct the traditional supply chain model and go direct to the supplier and distributors for products and stocks (Gereffi & Ong, 2007). They came out with the concept of centralize ordering and logistics for distribution but not warehousing of good. As a capitalist, Walton knew having a direct supply chain eradicates inefficiency and generate lower prices throughout the system. They are well known for their tough bargaining and are willing to pit suppliers against each other for lower bids (Lichtenstein, 2007). To lower cost Wal-mart would choose the