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Brief History of Walmart
Walmart is a global company that was founded by Sam Walton. Interestingly, before he opened up Walmart, Walton was working in one of the variety stores franchises in Newport, Arkansas that was owned by Ben Franklin. Walton played with the idea of opening up a store that would sell commodities at a lower price which will, in turn, attract numerous consumers thus making sales in volumes. Walton was, able to open up his first store in the year 1962. As it was with the first store, the strategy that he used was going to be the foundation of his franchise. In just eight years’ time, Walmart had its distribution centre, and over 30 stores opened serving the citizens of America (Hwang & Park 2016). The rise of the retail giant was however not smooth as one would think; legal battles in the court of which the store was in 2000 accused of not paying its employees for the overtime that they clocked and 2004 that there was sex-discrimination on the female employees that worked in its stores across the United States. With the Walmart China as examples, this paper will, therefore, strive in discussing or examining how institutional theory can provide insight into strategic management (Schell 2011).
Scott’s Institutional Theory
Any structure, socially speaking, that has gone through a soaring level of resilience can be classified as an institution. These institutions play a crucial role in providing social life with significance and steadiness through their elements which are; regulative, normative and cultural-cognitive (Lok 2010). These components of institutions are distinctive in a way that they are opposed to transformation. Institutional theory is a hypothetical position that puts more emphasis on legitimacy, isomorphism, and rational myths. Scholars that have been implementing this insight by Scott have come to ascertain and make a focus on the fact that the only way one succeeds by using is through replication. Through replications means that organisations just have to look and emulate the other organisations that are around them in regards to having structures, practices and how they make decisions (Suddaby 2014).
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As earlier mentioned, it is important to note that Walmart ’s success can be wholly attributed to the magnificent strategies that its top management team has been taking over the years since 1962. The Corporation has been able to cash in on the retail market by implementing five corporate strategies that have proven to be unique and successful. These five corporate strategies as illustrated in the “WalMart Out in Front” are; expanding to customers the nature of the store’s appealing nature, WalMart being an appropriate working place, improving the efficiency and operations of its business, pushing and support for the business’s international growth and expansion, and ensuring that contributions are made to the community (Walmart, 2016). However, as pleasant and sincere as these strategies might sound, information and conditions on the ground have been rather depressing (Greenspan 2015). Walmart has been losing its credibility due to the numerous legal problems and alterations that have hit the global Corporation.
As aforementioned, issues such as poor working conditions for its workers, gender discrimination, and the Corporation not paying its workers, have all led to the tarnishing of the excellent corporate image that Sam Walton had created decades ago. Sam Walton had created a great company during the time that he was alive (Liu 2013). He ensured that workers and employees did not feel mistreated or dejected. Instead of referring to the people working under him as workers, he saw and termed them as “associates.” He ensured that these employees were aware that the company needed them to survive and if the company survived then their lives would also change for the better. So, at this moment today, one would ask, what happened to the values that Sam Walton cherished? Why are Walmart ’s workers and employees demanding justice for possible mistreatments? Where did the retail giant go wrong regarding this matter? To answer such questions, it is imperative first to discuss how the Corporation was able to deviate from the once adored entity by its employees and customers it was to what it is now by the help of Scott’s institutional theory.
Scott’s Three Pillars
Over the years, it has been evident that Walmart does is not in support of its workers having or being in unions. This fact means that associates and employees of Walmart have had to deal and persevere to whatever condition that they have been through by the management. After Sam Walton’s demise, the store began to undergo certain problems, and the new management way of handling these issues was through setting up policies that the associates regarded as inhumane (Palthe 2014). Associates were expected to work for long hours without compensations in most of its stores and factories worldwide. Associates began to demand their rights, and this move was followed strikes and demonstrations in front of Walmart ’s stores and supermarkets by their workers (Caraway 2016). This resulted in about five stores closure of which the retail giant released a press statement saying that the stores had been closed down due to problems to do with plumbing that the investments were facing. However, this not the same information that workers from the Walmart stores that had been closed down shared with news reporters. According to the laid off, workers, the stores had been closed down due to the demonstrations and strikes that they had conducted in regards to them wanting better treatment. About the three pillars of institutional theory by Scott, one can easily depict that Walmart ’s central component was the regulative pillar (Liu 2013). The Corporation had sanctions, laws, and rules in place that it expected its employees to live and work by. The regulative pillar main basis of compliance was based on experience. Through the experiences that other companies and corporations were subjected to in the form of unions, Sam Walton, and the management after ensuring that the associates did not form or join any union. It was part of the regulatory rules put up by the Corporation (Hwang & Park 2016). Thus, workers and employees were expected to sign contracts fitted with this clause making it legally sanctioned. They adhere to the set rules and regulations because they have no other choice but to do so.
With Walmart, Sam Walton’s dream was what kept the workers at working with hopes of a better future. The associates felt an obligation to do their duties and behave as Walton needed them to. This can be depicted from the explanation of normative. Members of a given institution agree to work as per the condition and rationale set up by the top management of an organisation as to them this is like a duty and an obligation (Seenivasan & Talukdar 2016). They do not have to share the same dream that the owner, in this case, Sam Walton, or the management of the Walmart Corporation had. As it is evident from the Walmart ’s mission, the organisation is focused on providing its customers and clients with readily available and cheap commodities. This mission statement means that the top management has in place certain strategies that will result in the mission being realised (Duke 2010). However as earlier stated, employees of the retail giant have become exhausted and no longer feel the obligation to live and work as per the rules that have been set by the management. For instance, in Bangladesh, India, a garment factory that was supplying Walmart with apparels was blazed to the ground. Although the cause for the heinous act could not be explained by the managers of the plant, the word was that the workers had been responsible for the arson due to the harsh conditions and the low wage they had been forced to work under (Hiiemaa 2016).
Regarding this pillar, members and employees of a particular organisation believe in the change that is expected to be made thus they support and adapt to it. By helping it, the members of the said organisation are doing so because they believe and want to see the change happen (Freeman 2006). This can also be traced back to the narration of Walton when he was starting the retail store in discussion here. May not be all but the associates chose to stay and work as per the conditions set by the management as they believed in it and wanted it to work.
Walmart in China and Germany and failures of the three institutional pillars
In the beginning, Walmart ’s venture into China in the year 1996 was expected and as the market in the Asian country was an untapped success story waiting to happen. The business strategy applied by the Corporation into China was rather met with some policies and regulations imposed by the government that made their entry hard to some extent (Chuang et al. 2011). Luckily the government’s policies went through modifications that saw the limitations been loosened in a way that foreign business ventures could work hand in hand with the local franchises (Fernie & Arnold 2002). The need for the company to expand was fueled by the changes that were taking place around it or rather its external environment (Schell 2011). Therefore, its decisions and developments regarding entry into foreign markets were done by the PEST analysis. Availability of a supply chain ready market made China a good bargain for WalMart (Gereffi & Ong 2007).
Apart from opening up shops and outlets, the Corporation also opened up factories whereby the local people were hired to make garments for the retail store giant. In relation to the three institutional pillars, the associates agreeing to work as the Corporation required them was an indication of success. However, over the past recent years, the management in the country planned to introduce scheduled working hours that the people were not happy with and thus this saw the strikes taking place (Lee Yohn 2017). The workers were not willing to collaborate with the management and thus went together in arms to fight the move. This move by them was the first indicator of failure in regards to Scott’s pillars (Chan 2007). The institutional pillars do not provide room or information on what to be done if members of staff decide to go against all three; regulative, normative and cognitive. In addition to this, many of its associates in China were not happy with the working conditions and low wage pay which also resulted in demonstrations by the workers.
At first, China did not find it hard in embracing Walmart, but this was not the same case with Germany. The German population declined the way in which the retail giant operated when it expanded into the country in 1997 (Macaray 2011). One of the main reasons that is said to have led to the failure was the philosophy that the company worked which is an outright failure of the regulative pillar. People had expected the retail giant to do well in Europe rather than in Asia who came out to be the complete opposite. Unlike it was with other continents, Eurozone was different in the way that one was not allowed offer goods products at costs lower than their competitors (Brown 2011). This regulation made it possible for the playing field to be even in the case that every retailer in the market had the same chance of survival be it big or small. Entering into foreign markets with strategies that had worked in one country thinking it was going work too was wrong (Kim, 2008). It is important to note that institutional theory does provide information on what an institution is supposed to do once its workers lead to the failure of its three pillars.
Second and the most reasonable as explained by experts was that the German’s labour force was protected and could not be abused by low and falling wages. As an institution, Walmart was not respected and thus cognitive and normative pillars all failed drastically (Pioch et al. 2009). This was a clear indication that no single business organisation or entity could be allowed to get rich and richer while the government struggled in supporting the low paid workers. In regards to the successful management strategies applied by Walmart in America, they did not work in Germany (Mottner & Smith 2009). In relation to the three institutional pillars of Scott, it is clear for one to depict that members of staff, institutional members, were not disregarded what these pillars stood for. Both cognitive and normative pillars failures led to the Corporation downfall in Germany. The rules, regulations and values that the company stood for were not conversant with the Germans. They felt no moral obligation, or neither did they believe in the companies’ values. The regulative pillar at first stood, but members of the public were not in support of old people being put to work in as supermarkets attendants (Gereffi & Christian 2009). From these two case studies, it is imperative to note that the three institutional pillars as argued by Scott failed in to prove successful in other countries in regards to its management strategies that had proved successful in the United States (Talaulicar 2009).
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From all that has been discussed above, it is evident that the three institutional pillars as suggested by Scott’s theory play an essential role in the success of an organisation. Walmart ’s began well and grew to be the world major retail store as its founder Sam Walmart had dreamed it would be. However, with the strategic measures that were put in place by the management, things began to become hard for the giant retail store. Existing competitions have caught up with it which has been the main reasons for it closing most of its stores worldwide as it has been discussed in this article. With the malpractices that have been levelled against it, it is sad that the Corporation’s management does not stand for what it preaches or instead values human lives less. In as much as they have to reach their goals and objectives and this entails members of staff working harder than necessary, then the management should ensure that its staff work in right conditions and are compensated accordingly to the amount of effort put in and work done. If this were the case with the Corporation, then there would not have been strikes and demonstration as it has been witnessed in the recent past. Therefore, the company should take acute management strategies that will see it rising back to its former glory with most importantly ensuring its workers are well taken of as Sam Walton’s had initially intended them to be.
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