Organization of International Business

Wal-Mart Stores, Inc. was incorporated in 1969 and now is the world’s largest and most successful grocery retailer which was selected as world’s largest company in 2007, by Fortune 500. It has 8,970 stores in 15 countries and total revenue of $421,849 billion (2010). Wal-Mart’s main business strategy is ‘EDLP-Every Day Low Price’ which is the key-point of their success. To accomplish this strategy, they mainly focused on efficiency of distribution structure. They used ‘Cross-docking system’, ‘POS’ system, ‘QR-Quick Response’ System. All those strategies core values are ‘Time’ and ‘Response’.

Shorten the time for everything includes distribution, storing, etc directly affected lower the price of goods which could be best response to customer need. In other words, Wal-Mart has been successful since they always managed their time and response to customer. Those points were same for Wal-Mart’s “International division” startegy. Their international division wasn’t like these days at the early stage. The international division was centralized so the branches needed to get approval for every action and decision from headquarter in USA.

However, this centralization process made whole process slow and it harmed the core value of Wal-Mart. Also, they realized that the system can’t be same in other countries. It needed to be changed and modified in order to fully get into each local market place. By the late 1990’s they started to change their policy for international division. They gave more responsibility to each division so that they don’t have to wait for approval and response from headquarter. By this change, each international divisions could meet their local market’s need more rapidly and effectively.

2. Why did the centralization of decisions in Wal-Mart’s international division at headquarters create problems for the company’s different national operations? Has Wal-Mart’s response been appropriate? The headquarter first thought that centralization will help them get into other countries cause the methods and ways they used were already proved in domestic market. The centralization wasn’t that bad when they started because there were not many things to care about. However, by the international division gets bigger, they had to deal with bunch of things from lot of different countries.

The headquarter had to consider tons of decisions and problems. Of course the whole process got into arrears. In other word, the headquarter of Wal-Mart was overloaded. This condition was natural because the domestic way couldn’t be fitted same in other countries. Each international division tried their best in order to make maximum profit on their market, and that effort caused lot of things to be approved by headquarter. To solve this problem, Wal-Mart started to decentralize their international division. This helped each division to tailor them self more easily for the local customers.

They could make decision and take action faster. Also they could response to local customer’s need instantly. I think this decision was pretty appropriate. Headquarter can focus to their main domestic market without waste their energy and international division also can make best result in their local market. 3. Do you think that having an international division is the best structure for managing Wal-Mart’s foreign operations? What problems might arise with this structure? What other structure might work? I think international division is moderate choice for Wal-Mart’s foreign operations.

The head quarter can easily replicate the domestic structure to international division so that they don’t struggle from start in new local market. However, I think there could be problems arise with that way. There could be damage to headquarter’s reputation they’ve made in domestic market if international division makes mistake or distortion of core value while they try to adjust to local market. It will seriously harm whole Wal-Mart’s name and will affect their sales. For example, while they try to get into Korea, they didn’t know about Korea’s atmosphere and condition.

They struggled in Korea for years and finally got out of Korea without getting anything. This mistake damaged Wal-Mart’s name maybe not only in Korea division but also in headquarter. In this case for Wal-Mart, Worldwide Area Structure could worked, too. If they use this structure, the great system they proved in domestic market can be used in all the areas but all the other things can be adjusted to each area’s property. In that way, they can reduce possibility of failure in certain country like Korea or German.

4. Conclusion Wal-Mart is one of biggest company in the world and they’re making huge amount of money all over the world. There is no doubt that they are successful. But it doesn’t mean that they have nothing to fix or improve. If they want to expand their business, they should make their international division more efficient and effective. That means, sure they should use their great system they have used in domestic market to international division but those strategies are needed to be reformed in each countries. In that way, they might able to make high profit all over the world without struggling from cultural and industry difference.