globalization and trade liberalization, more and more organizations are finding it easier to operate internationally. Success from such international operations does not, however, come easy — organizations are forced to restructure their operations and redesign their products and services in such a way that they are able to respond to the needs of their increasingly diverse client base. People in different countries have different cultures, values, beliefs, customs, and habits. In order to thrive in foreign markets, organizations need to be aware of these differences, and to ensure that the same are effectively captured in their organizational structures and product designs. This appreciation for diversity within other cultures is referred to as ‘worldliness’, and is increasingly being adopted as a source of competitive advantage for businesses operating globally.
Wal-Mart, the world’s largest retailer, is perhaps the best reflection of the concept of worldliness in management. Headquartered in Bentonville, Arkansas, Wal-Mart grew from a small discount store in 1962 into the world’s largest company, operating in over 70 countries, and generating over $250 billion in revenues every year. The company operates three types of outlets — Wal-Mart stores, Sam’s Clubs, and Wal-Mart Supercenters — all guided by the core mission of saving people money so they can live better. Approximately one-fifth of its annual revenue stems from its international activity; and it is believed that this success is due, in part, to the company’s effectiveness in responding to the diverse needs of its customers (Gereffi & Ong, 2007). The company has, however, not had a smooth run in implementing its growth strategy. The ‘Everyday Low Prices’ concept, upon which its operations are pegged, has proven successful in some markets such as Canada and Mexico, but has been a total flop in others such as Indonesia and South Korea (Gereffi & Ong, 2007). In the Chinese and Japanese markets, the company is still struggling to establish its presence, almost five years since it first ventured there. These mixed outcomes are a perfect demonstration that the company’s success formula in different markets is far from perfect. This text analyzes the company’s entry strategy into the Chinese and Japanese markets with the aim of showing that much of its poor performance in foreign markets stems from its failure to adopt a worldly mindset; and that its overall profitability could be improved if more resources are committed towards research geared at understanding the cultures of potential markets and their effects on the competitive environment.
We begin this discussion by giving a brief overview of what it means to have a worldly mindset, how having a worldly mindset influences managerial decision-making, and where the whole concept of worldliness in management emanates from.
The Five Minds of a Manager
Gosling and Mintzberg posit that given the rapid evolution of technology and the increasing volatility of the global marketplace, it is crucial for managers to have effective managerial skills that will enable them to make the right decisions for their organizations. They argue that in order to be an effective manager, one needs to master the art of thinking (reflecting) before acting (Changing Winds, 2011). Failure to do this results in thoughtlessness, which could be costly to an organization. Managers, therefore, need to merge the two (action and reflection) and function at that point where practical doing meets reflective thinking. Moreover, they must be able to enroll people to help in the implementation and actualization of the decisions they make and must have the skill to build and maintain effective relationships so that these people are able to function effectively. In other words, managers need to have:
A Reflective Mindset: they need to be able to gauge the future based on their own past experiences. They ought to be able to derive meaning from their past experiences, and from these, develop options for responding to the issues emerging in the world around them currently, and those likely to emerge in future (Changing Winds, 2011)
An Action Mindset: just as horses pull a chariot in the direction they desire, manager ought to pull their people towards a common vision and keep them moving in that direction by providing a favorable environment that enables them to realize their hopes and aspirations (Changing Winds, 2011).
A Collaborative Mindset: they must recognize that people play a crucial role in the actualization of the organization’s objectives. As such, they must put in place comprehensive systems to ensure that they are well-engaged, and that effective manager-employee relations are built and maintained (Changing Winds, 2011)
The Analytical Mindset: they need to recognize that the organization works like a system, made up of various structures, techniques, departments, and physical assets. It is the manager’s role to bind these components together through vision and organizational values so that they are able to work together effectively (Changing Winds, 2011).
A Worldly Mindset: they must not run their organizations guided by a global mindset, which yearns for uniformity and consistency; rather, they need to adopt a worldly mindset that delves into the customs, habits and cultures of people, and structures operations based on the unique and specific conditions that characterize a specific group (Changing Winds, 2011). For a global business, worldliness means recognizing the cultural differences between countries and developing unique ways of responding to their different needs. What may be an element of success in the United States may not necessarily work in another country whose values, habits, and customs differ from those of Americans.
Wal-Mart’s Application of the Worldly Mindset
Wal-Mart just happens to be one of the many companies that focus more on the global aspect, and less on the worldly aspect of growth as suggested by Gosling and Mintzberg. This has proven to be quite costly, causing the company to perform poorly in some of the most promising markets. The Chinese and Japanese cultures are, for instance, substantially different from the American culture, yet the company still carried most of its U.S. practices over to its branches in China and Japan when it ventured there. Instead of adapting its operations to respond to these new cultures, the company wrongly assumed that the new consumers would readily adapt to its way of doing things.
The ‘Everyday Low Prices’ phenomenon, for instance, which was and still is a source of competitive advantage in America, ended up being one of the key points of failure in China and Japan (Gereffi & Ong, 2007). This is because the Japanese and Chinese cultures equate high price with high quality, and its people are generally quality-sensitive (Gereffi & Ong, 2007). As a matter of fact, Chinese and Japanese consumers purchase almost 50% of the world’s luxury goods every year (McKinsey Consumer & Shopper Insights, 2012). This basically means that with its ‘Everyday Low Prices’ strategy, Wal-Mart generally failed to appeal to quality-sensitive consumers, who also are the majority in the Chinese and Japanese markets (Gereffi & Ong, 2007). Greater success would perhaps have been realized if the company had shed off its discount label; however, that would only be possible if it had researched the new culture beforehand.
Consumer purchasing habits in China, Japan, and the greater continent of Asia are also quite different from those in America (Gereffi & Ong, 2007). For instance, whereas Americans prefer to buy in large quantities and ‘stock-up’ to reduce their trips to the store, Chinese and Japanese consumers prefer to buy in small quantities in regular intervals (Gereffi & Ong, 2007). Towards this end, a large-scale discount retailer may not work as effectively for them as a small specialty store with shorter queues, more customization and less congestion would.
Additionally, unlike Americans, who prefer pre-packaged foods, the Chinese and Japanese cultures tend to have more preference for fresh foods; yet the company carried its American style of operation, which focuses on stocking pre-packaged food items as the main commodity and fresh groceries just as a by-the-way, onto these new markets (Gereffi & Ong, 2007). Even in the small grocery sections it had, the company still made a blunder, offering food items the American way, in freshness-dated, plastic-wrapped containers, with total disregard for the fact that in the Chinese and Japanese cultures, “fresh’ means that you can pick it out yourself and watch it wriggle” (Gereffi & Ong, 2007, p. 47). As a result, consumers simply took a pass. A more relevant strategy would have been to bring wet markets indoors so that consumers are able to pick out their own dinner items. However, that would only be possible if the company had conducted effective research on the consumption habits and cultures of consumers in the new markets beforehand.
Based on these observations, I recommend that the company take the following steps to strengthen its worldly mind-set and prevent occurrences of failure:
i) Sends research teams to study the consumption habits and cultures of locals five months before venturing into a new market
ii) Works with the local governments and universities in new markets to promote its understanding of the new culture and develop ways of effectively incorporating the same in its operations
iii) Uses joint ventures as opposed to independent strategies when venturing into uncertain markets. By joining forces with an established company that is already operational in a particular new market, the company could reduce its chances of failure resulting from cultural misunderstandings
Conclusion
Worldliness is increasingly being recognized as a source of competitive advantage for businesses operating globally. It basically means a heightened ability to appreciate diversity within cultures and respond effectively to the unique needs of different markets. Wal-Mart, the world’s largest retailer, currently operates in over 70 countries – but despite its strong geographical presence, it still faces difficulty establishing itself in the Japanese and Chinese markets. This is largely because the company focuses more on the global aspect, and less on the worldly aspect of growth; and this has made it difficult for it to meet the unique needs of different markets. There is need for it to commit more resources towards research geared at understanding the cultures of potential markets and their effects on the competitive environment. Only then will it be able to venture successfully into new markets.
References
Changing Winds. (2011). The Five Minds of a Manager: Insights from Mintzberg and Gosling. Changing Winds. Retrieved 3 April 2015 from https://changingwinds.wordpress.com/2011/05/09/the-five-minds-of-a-manager-insights-from-mintzberg-and-gosling/
Gereffi, G. & Ong, R. (2007). Wal-Mart in China: Can the World’s Largest Retailer Succeed in the World’s Most Populous Country? Harvard Asia Pacific Review, 9(1), 46-49
McKinsey Consumer & Shopping Insights. (2012). Luxury without Borders: China’s New Class of Shoppers Take on the World. McKinsey Consumer & Shopping Insights. Retrieved 6 April 2015 from https://solutions.mckinsey.com/insightschina/_SiteNote/WWW/GetFile.aspx?uri=%2Finsightschina%2Fdefault%2Fenus%2Fabout%2Four_publications%2FFiles%2Fwp2055036759%2FLuxury%20Without%20Borders%20China%E2%80%99s%20New%20Class%20of%20Shoppers%20Take%20on%20the%20World_fd6a761f-2b88-4e8f-a7cc-8afac03a88f1.pdf
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