ASDA
stores ltd is a fully owned subsidiary of Wal-Mart Stores Inc which is located
in the United States. The global retail giant employs over 2.1 million
employees worldwide with a revenue base of over $ 421.8 billion (OneSource
Information Services, 2011). The retailer operates under three distinct
divisions namely: Wal-Mart US, Wal-Mart International and the Sam’s Club. The
Wal-Mart US continues to contribute the greatest percentages to the net sales
of the whole group with the latest financials (for the year ended January 2011)
indicating that the division contributed over 62% of the net sales for the
entire group (Global Data, 2011). This division operates exclusively in the USA
and Pueto Rico by maintaining various stores in the region. Sam’s club also
mainly operates in the USA and is recorded to have contributed about 11.8% of
the group’s net sales in the year ended January 2011 (OneSource Information
Services, 2011). The International division operates subsidiaries of the group
in over 14 countries across the world. Most of these subsidiaries are fully
owned with some being joint ventures. The subsidiaries include: Wal-Mart de
Mexico, Suburbia, S. De, Operadora Vips, Operadora Suburbia, and Banco Wal-Mart
de Mexico in Mexico; Wal-Mart Centroamerica in Guatemala; ASDA Group Ltd, ASDA
Stores Ltd, Netto Foodstores Ltd, Netto Foodstores South Ltd, Erteco UK ltd, ,
Netto Foodstores North Ltd, International Produce Ltd, Mclagan Investments Ltd,
Isis Reach Belvedere Ltd, the Burwood House Group Ltd, Box Sutton UK Ltd, ASDA
Supermarkets Ltd, Power4All Ltd, ASDA Financial Services Ltd, Porth Investments
ltd, ASDA Storage Ltd, ASDA Souhthbank Ltd, Bandsound Ltd, and others in the
United Kingdom; Wal-Mart Brasil Ltd in Brazil; Wal-Mart Chile SA in Chile;
Massmart Holdings and Game Stores in South Africa; Seiyu GK, Seiyu Foods and Ssv Inc among
others in Japan; and Seiyu Ltd in Indonesia; Wal-Mart Argentina in Argentina;
and Wal-Mart Canada Inc and others in Canada among others (OneSource
Information Services, 2011).
Wal-Mart
continues to pursue its goal of being the global retailer of choice and has
accordingly sought to expand into more countries in addition to the 14 that
they are already operating in. Their status as a leading multinational is well
established. The company runs over 40 wholly owned subsidiaries internationally
in countries such as Canada, United Kingdom, Japan, Guatemala, Brazil and South
Africa (Global Data, 2011). These subsidiaries are run under the Wal-Mart
international division. The organisational structure followed by Wal-Mart is a
modified version of both the divisional and the matrix systems with varying
degrees of both components. At the highest level, the company is divided into
three divisions which include Wal-Mart US, the Sam’s Club, and Wal-Mart
International (Global Data, 2011). The three divisions are headed by executives
who report to the group’s CEO.
While
the Wal-Mart US and the Sam’s Club predominantly operate within the USA, the
Wal-Mart International is primarily tasked with the responsibility to oversee
the operations of the group’s subsidiaries worldwide (Morningstar, 2011). Each
of the subsidiaries is regarded as a unit which a complete array of business
functions which include financial management, marketing, research and
development and other functions. They seldom share any business functions. The
managers in charge of each of the subsidiaries act as the CEOs of the specific
subsidiaries and make reports to the parent company as appropriate
(Morningstar, 2011). Moreover, the subsidiaries are allowed high latitude in
determining their mode of operation and their approach in marketing themselves
in the markets. This approach is both tactical and strategic. The freedom to
determine the mode of operation enables the companies to adopt a local outlook
and therefore capture their respective target markets with relative ease. Many
societies tend to embrace organisations they consider as one of their own and
this provides the justification for this approach. Besides, managers feel more
satisfied and more motivated when they are allowed to design the systems hence
giving them more authority over the subsidiaries and getting them to be fully
accountable for the results posted by the subsidiaries (Thom and Wenger, 2011).
Various other issues may also arise that make it impossible for multinationals
to enforce uniformity in management and operational systems in their subsidiaries.
For instance, rules regarding labour relations differ from country to country
necessitating such certain to changes to ensure compliance. Moreover, cultural
values differ from one country to another and it is absolutely necessary that
the management styles and operational systems be largely reflective of the
cultural values of the host cultures (Thom and Wenger, 2011). One good example
can be drawn from the staff management systems between the Wal-Mart US and
their subsidiary in Japan. In the latter organisation, the management systems
are more geared towards promoting team accountability and team effort while in
the former, individual achievement is emphasised.
Multinationals
choose to enter foreign markets through a number of methods. The use of exports
is most commonly used in the initial stages by most multinationals. Other
methods include the use of strategic alliances, setting up of marketing centres
in the targeted markets, entering into joint ventures in the markets, and even
acquiring fully owned subsidiaries in such markets (Morningstar, 2011).
Wal-Mart is predisposed towards the use of wholly owned subsidiaries with only
a few of their foreign outlets being joint ventures (Morningstar, 2011). The
use of fully owned subsidiaries is advantageous to the organisation in that it
ensures that the parent company is in full control of such subsidiaries and
therefore not prone to any disagreements with any partners.
ASDA
Stores Ltd operates predominantly in the UK and it specialises in retailing of
both food and non food items (OneSource Information Services, 2011). Although
it is a subsidiary of Wal-Mart, ASDA has the liberty to pursue all growth
strategies it deems necessary including the decision to venture into new
markets. The retail industry in the United Kingdom is greatly saturated and this
limits the ability of any organisation to record impressive growths hence
forming the rationale for ASDA’s intention to venture into the Chinese market
which is an emerging economy and therefore more promising.
China
is one of the emerging economies in the world with the highest rate of
sustained growth over the last three decades. The country is emerging from a
socialist economy where most activity in the market was state-controlled and is
steadily edging towards being a market economy (Fred, et al, 2006). The rapid
economic growth rates experienced in China are a source of attraction of
investors who view the Chinese market as having more potential than their
saturated markets in the developed world. For instance, whereas the UK retail
industry is riddled with intense rivalry, the Chinese retail industry can be
described as one with low levels of rivalry with the growing market sizes
greatly contributing to this status (Global Data, 2011). As analysts would
intimate, markets with lower level of rivalry tend to provide organisations
with higher prospects for growth than those that have high rivalry levels. Some
of the indicators of low rivalry include expanding economies and low market
dominance by the largest players. These factors make China favourable. The
traditional Chinese mindset was characterised by thrifty spending where as much
savings as possible were made for future use (Fred, et al, 2006). This cultural
norm has also been changing steadily with more and more of the consumers
preferring to spend more of their incomes to enhance their personal
gratification. This factor, coupled with the fact that the increased market
activity has been contributing to rising levels of disposable incomes among the
Chinese, is responsible for the growing levels of demand (Myloni, Harzing and
Mirza, 2003). The market is therefore ideal for investment by ASDA.
The
complexity of the Chinese market may also be found in the multiplicity of their
regulatory organs with often overlapping roles between the central government
and the local governments (OECD, 2011). It is therefore crucial for any
organisation to make accurate findings on which authority to report to in view
of the fact that any conflicts with the administrations can be detrimental to
the well being of the business. These weaknesses mainly stem from the fact that
the Chinese market systems are yet to fully mature and businesses must beware
of such inherent weaknesses in order to perform well in the market (OECD, 2011).
It is also important to note that the Chinese population are greatly proud of
their identity and would only consume foreign products only when they find it
impossible to find similar products of the same quality amongst their local
companies. The same applies to foreign organisations. This socio-cultural
aspect is highly relevant to any foreign organisation that intends to operate
in the market. Where an organisation is perceived to be strongly foreign, its
chances for performing well in the market are dimmed. To ensure that such
eventualities are prevented, a foreign organisation should endeavour to portray
itself as a Chinese company by ensuring that the operational and management
styles are as much as possible in conformity with the local practices (Pudelko
and Harzing, 2007). The composition of the staff should equally be dominated by
the locals with some of the management positions as well being held by them.
Such moves are important in helping such organisations to gain acceptance
locally.
When
examining the HRM practices in China, it is important to differentiate between
what are legal requirements and which ones are just common practices that have
gained acceptance in the country with time. The HRM practices in China are
greatly influenced by the cultural backgrounds of the population (Pudelko and
Harzing, 2007). The cultural beliefs shape the expectations of the employees
who then influence the management practices in the organisations. For instance,
China which has a high context culture is dominated with a hiring system based
on recommendation where people within the organisation recommend others for
employment based on their knowledge of such candidates (Pudelko and Harzing,
2007). This system creates a family-like structure in the organisations where
the employees are largely responsible for each other and accountable to each
other. It therefore follows that lines of responsibility are best assigned to
working teams where the team members act as supervisors for each other to
ensure that the teams perform up to expectations. In this setting, practices
bent on encouraging individual achievement as is common in the West are
generally frowned upon. The Chinese also largely expect authoritarian leadership
styles more than the other styles (Hempel, 2011). This is because this society
is a high power distance society. Under this system, decisions originate from
the top and communicated to the subordinates who are then expected to implement
the instructions as given. Minor decisions can be made at the team level on how
to go about the implementation. This belief is largely based on the cultural
aspect of the Chinese where the leaders were expected to be the sources of
wisdom and goodness and who would serve selflessly for the public good (Hempel,
2003). The implication of this expectation is that the persons appointed to any
management positions would need to be experts who would be able to know what to
do at any point (Edwards and Zhang, 2003). This is unlike the democratic
leadership settings where the manager would simply need to get the experts to
provide a solution and would therefore not necessarily need to be a technical
guru.
China
is however changing and is appearing keen to enforce its new labour laws which
got enacted to bring the country at par with the international players. For
instance, the labour laws have tremendously raised the minimum wage
requirements hence making it impossible for companies to thrive on cheap labour
(OECD, 2011). The use of employees who are on long term fixed contracts has
also been restricted hence organisations are required to ensure that their long
term employees are on permanent and pensionable employment. There have also
been moves to encourage employee appraisal in order to encourage productivity
in companies and discourage the traditional models that emphasised on the
length of service as the sole basis for salary reviews in organisations (OECD,
2011). On the whole, the differences between the Chinese and the UK labour
systems are constantly reducing in the face of attempts to bring the Chinese
HRM regulations and practices to international standards.
Once
a subsidiary has been set up in a foreign country, the management teams are
often faced with dilemma on whether to pursue full localisation of the HRM
practices or to maintain the practices acknowledged by the parent company.
There are advantages and disadvantages to both sides. Where the adoption of the
parent company’s practices is pursued, the subsidiary may have a hard time
portraying itself as a local company (Easterby-Smith, Malina and Yuan, 1995).
In cosmopolitan environments where the culture is cosmopolitan, this may not
result in any negative effects. However, the Chinese as has been stated above
are highly sensitive to their cultural values and are bound to treat such an
organisation less favourably (Stockman, 2000). The advantage of maintaining
same management practices is that the parent company can easily monitor the
subsidiary’s activities and understand them without undue strain. Moreover, the
company would not need to spend any resources in training managers and
expatriates being sent to the subsidiaries by the parent companies.
Localisation on the other hand ensures that a company is portrayed as a local
company and therefore able to appeal to the emotions of the target market with
relative ease (Easterby-Smith, Malina and Yuan, 1995). This emotional appeal is
considered to be essential in creating brand awareness and establishing a
relationship between the brand and the customers (Easterby-Smith, Malina and
Yuan, 1995). Chances of organisational success are therefore high where
localisation is pursued. However, this step comes with the disadvantage of a potential
miscommunication between the subsidiary and the parent company. Mischievous
managers may use localisation as tools to avoid accountability to their
international superiors hence bring about an erosion of the benefits supposed
to be derived from the localisation.
The
management practices at ASDA are in line with the UK labour regulations and
also tend to conform to the expectations of the populace. The UK has stringent
laws that emphasise the payment of the prescribed minimum wage which ASDA
adheres to religiously (Pudelko and Harzing, 2007). Other conditions requiring
that pension submissions be made on behalf of the employees and medical
insurance provisions among others are also well adhered to. The employment
terms for employees are also restricted by law and companies are not allowed to
place employees on indefinite contract terms. Accordingly, ASDA pursues the
option of granting their employees permanent and pensionable employment terms
(Global Data, 2011). This practice can effectively be adopted by the Chinese
subsidiary as it would not be in violation of any laws in China. In fact, the
regulatory agencies in China have been taking measures to enforce the rules on
minimum wage and terms of service for the Chinese employees.
The
reward systems at ASDA UK are also in line with the cultural practices in the
UK. The society in the UK is largely individualistic and tends to emphasise
more on individual performance. Accordingly, employees are allocated specific
responsibilities which they are individually responsible for and appraisal is
done based on their performance as compared to the set objectives (Pudelko and
Harzing, 2007). Reward systems are therefore used to encourage productivity at
the individual levels. Some of the rewards available to the employees include
bonuses, commissions, and financial gifts which are awarded on merit. The
annual salary review is also based on performance. It is therefore quite common
to find individuals who are talented but relatively new to the organisation
earning higher salaries than their more experienced colleagues. This
perspective is however contrary to the Chinese cultural expectations and cannot
be fully implemented in its entirety and remain effective. The Chinese culture
is more collectivist than the UK culture and over-emphasis on individual
performance in the Chinese context may be counter productive (Zelog, 2011). In
China, the wealth of experienced is a highly valued any move to disregard this
aspect may disorient the employees and reduce their productivity. Collective
responsibility is hailed and is the basis on which organisational operations
are organised (Zelog, 2011). In this regard, aspects of the ASDA UK systems can
be implemented albeit in a modified fashion. For instance, the merit systems
and the reward systems can be based on teams where each team is assigned
specific responsibilities and the team members rewarded based on the
performance of the whole team.
Another
aspect of the HRM practice that would be difficult to replicate in the case of China
is the recruitment of new employees. The parent company in the UK mainly
pursues open and transparent recruitment process where positions are open to
any talented individuals seeking employment (Hayden, et al, 2002). In the UK,
talent and skills matter more to employers than their personal backgrounds.
Little emphasis is therefore laid on the applicants’ personal lifestyles before
any decision to employ them is made. This scenario is however very different in
the case of China. Although this is not a legal requirement, cultural
expectations make it difficult for managers to completely disregard the fact
that their subordinates expect them to follow the recommendation system which
is prevalent in China (Luo, 2008). According to the Chinese, integrity is more
central to a good working relationship than skills which can easily be acquired
with adequate exposure. It is therefore critical that the new employees be
persons they know sufficiently well. This situation is likely to present the
management with a dilemma in that, while they may not want to lose any
brilliant talents while recruiting, they would also want to keep the employee
morale high and sustain productivity levels. Similar differences would also
attribute to the democratic leadership style common in the UK. Some measures of
democratic leadership can be applied successfully especially by utilising the
team structure in which the employees are accustomed to working.
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