Wal-Mart Stores Inc. is a worldwide retailer that operates as a grocery, hypermarket chain, and discount department store. According to the Fortune Global 500 rankings in 2016, it is the world's largest corporation by sales; roughly US $480 billion; and the largest private employer with approximately 2.3 million employees (Brunn 2006). Walton Sam founded the firm in 1962, with the launch of the first Wal-Mart discount store in Rogers, Arkansas. Wal-Mart was named the most admired company in Fortune magazine in 2009 as a leader in job opportunity, sustainability, and corporate charity (Yue et al. 2013). Wal-Mart statement is the “price leadership drives global performance” (Yue et al. 2013). The management of the Wal-Mart focuses on the price leadership in every market since pricing strategy is the direct approach to attract customers and achieve performance. For the Wal-Mart to implement the prices leadership, the company statement is to “save money live better” which is relevant since its establishment in1962 by Sam Walton (Yue et al. 2013). The internal customers, management, and employees should reduce cost and hence achieve economies of the scale. On the other hand, external customers, they can purchase goods in Wal-Mart because stores offer low price products to them.
Porter (2008) in his well-known book said that there are three primary competitive advantages for a firm, which are cost leadership, differentiation and focus strategy (Porter 2008). Companies utilize these strategies to achieve a competitive edge over the competitors. Wal-Mart Company takes a cost leadership strategy; it aims to become the low-cost leader in the retail industry across the globe. Wal-Mart maintains its competitive advantage through its satellite-based distribution system and also keeps store location cost to a lower level by placing stores on low-cost land (Chuang et al. 2011). Wal-Mart purchases a vast quantity of the items from its suppliers to form economies of scale with efficient stock control system assisting it to have lower operating cost than those of its competitors. Additionally, it imports goods from the china “the world factory” for its low-cost operation (Chuang et al. 2011). And so, the firm’s company-level strategy is low cost with little differentiation strategy.
Managers engage in three levels of strategic planning; the corporate, business level, and functional level strategy. The functional approach should aid the complete company strategy and corporate plan could be implemented more efficiently and effectively (Anca-Ioana 2013). The Wal-Mart business and corporate level strategy is the low-cost leadership strategy. Also, the Wal-Mart builds its low-cost leader on employment plans that assist it to achieve extraordinary low employment cost (Yue et al. 2013). Thus, through the minimal HR operation, Wal-Mart tried to maintain it dominate competitive edge.
Wal-Mart HR policies and integration with corporate strategy
The simple principle that underlies the strategic human resource management is that firms adopting a particular approach need HR practices that are varying from those required by enterprises choosing an alternative strategy (Alfes et al. 2013). There are three SHRM theoretical models in the studying the HR discipline: the resource-based configuration perspective, contingency, and universalistic perspective. In this case, the paper will deal with the contingency perspectives of the “best fit” (Budhwar and Debrah 2013). Therefore, the individual’s practices of HR activities will be selected based on the contingency of the particular context of the company. It is worth noting that individual HR practices will interact with business strategy to result in organization performance (Bloom and Reenen 2011). In the above section, there is excellent emphasizing on the identifying and analyzing the primary contingency factor of Wal-Mart’s corporate strategy. Thus, the next part will discuss the fitness of the HR practices in the Wal-Mart with the theoretical model, which is also integration process of contingency variables and HR practices.
From the recruitment viewpoint, Wal-Mart has tried its best to minimize its cost considering the significant number of its employees. For instance, a report in 2004, New York Times on an internal audit found an extensive violation of the child labors law and state regulation requiring time for the meals and breaks (Greenhouse and Barbaro 2006). Thus, the cheap labor from the minors enabled it to earn a competitive edge over other firms. Wal-Mart also faces many lawsuits alleging that the business discriminates against employees with disabilities; hiring individuals with incapacities means more equipment and facilities for them, and then there is a loss of the efficiency at some extent (Yue et al. 2013).
On the training viewpoint, the Wal-Mart refers its workers as “associates” and motivates managers to think of themselves as “servant leaders” that are to concentrate serving others while focusing on achieving results in line with the firms’ integrity and values (Yue et al. 2013). A company’s strategy necessitates behaviors need for success, and the use of the HR practices in a business is to control and reward workforce behaviors. Therefore, the enterprise should implement HR practice that motivates the worker's behaviors that are consistent with the firm’s strategy (Truss et al. 2012). Wal-Mart adjusts the workforce’s behaviors and competencies to the company’s strategy requirement; that is a low-cost strategy through training and development. Also, the logic is embodied in its “lock-in” in its night shift in several stores (Yue et al. 2013). And so, through this policy, it prevents it workers from the behaviors and eliminates the quick trips home or the cigarette breaks.
From the performance perspective, Wal-Mart has a very high standard and demanding job design. The New York Times report that Wal-Mart had an extensive violation of state regulation requiring time for the meals and breaks (Greenhouse and Barbaro 2006). For instance, minors working too late or for too many hours in a day or during schools hours, for the performance appraising just force them to do so. In the management of the career, the Wal-Mart goes to more considerable length to reduce the cost. There are many instances where women sue the company for its discrimination policy against women by paying less than men and denying them promotion. Women get demotion if they complain about unequal treatment (Yue et al. 2013).
On the compensation management perspective, the company shows very aggressive HR policies to fit the low-cost strategy. Wal-Mart imports more than $15 billion worth of products from the china not only for the strategic consideration for the supplier's chain economy but also the company has factories in the country, whose goods are branded with the name of the Wal-Mart (Chuang et al. 2011). With this kind of the strategy, the Wal-Mart pays less to the Chinese labors and earns some competitive advantage, and so, it illustrates how the company’s corporate strategy intensely integrates with its HR approach. In California, the Wal-Mart employee receives on average 31% less than employee employed in large retailer firms (Zimmerman 2004). The operating cost of the Wal-Mart in 2002 was 16.6% of the total sales compared to the 20.7% average for the retail industry as a whole (Zimmerman 2004). Hence, with the inventory and operating cost set higher by the senior level of the management, the store managers must turn to wages to maximize the profit, and Wal-Mart expects the labor cost to be cut further each year.
From the employee benefits and safety perspective, Wal-Mart’s HR policies are well aligned with the corporate-level strategy. At Wal-Mart, employees eligible for benefits such as health insurance must pay over the odds for them. For instance, in 1999, employees paid 36% of the cost, while in 2001, the employee payment rose up to 42% (Yue et al. 2013). However, in the United States, large-firm workers’ pay on average of 16% of the premium for the health insurance (Zimmerman 2004). The unionized workforce in the supermarket pays nothing. There has been a regular accusation of not providing workers with affordable access to the healthcare, but HR and top managers know their focus was just to try to implement the low-cost strategy.
Lastly, from the labor relations standpoint, the Sam Walton sought to bring the high value through the aggressive discounting to customers to implement its low-cost strategy. The company has a robust anti-union policy because the unionized supermarket employee pays nothing. There is an allegation of firing the workforce sympathetic to the labor organization. All the new workers are shown a propaganda videotape which means joining a union would have a lousy implication for them and thus employees should never sign a union card. Guardian in the UK reported that Wal-Mart was facing the prospect of a legal battle with the GMB trade unions in a row over collective bargaining rights (Yue et al. 2013). The union would not accept the company’s withdrawing 10% pay offer to more than 700 employees after they rejected a new package of conditions and terms including giving up rights to collective pay bargaining (Tabuchi, 2015). Recently, the Wal-Mart has allowed the unionization in their stores in the china, where it is mandatory to do so. But actually, the binding rules were made before the Wal-Mart venturing into the China market (Chuang et al. 2011). So why Wal-Mart give up its persistence not having the union? It is argued that operating business in China is mainly tricky due to the higher relative need for personal relationships (guanxi) (Meeks and Ph 2011). Therefore, the Wal-Mart China tries to have a good relationship with China government and other influential groups. Hence, the company allows for the unionization in the business due to the corporate strategy and HR policies. If the company ignores the china’s government rule, then the cost would be more significant than it would save for organizing no unions in its labor relation management (Chuang et al. 2011). And so, from the above, the Wal-Mart would adjust to the HR policies and activities to fit its corporate strategy contingency.
The manager in one of the functional department of the Wal-Mart tries to fit the corporate strategy to low cost down. Some of the rules includes implementation of anti-union policy in its stores to reduces the extra cost from the union employees, “lock-in” policies, resisting employment of disabled people for the loss of efficiency, discrimination of women by giving them few cash and opportunities for the promotion, and the male colleagues in the Wal-Mart receiving lower salary comparing with other retail industry of average level (Yue et al. 2013). In 2001, six female employees of the Wal-Mart filed suit against their company in the US federal court claiming that the company discriminated against them on the salary, training and salary basis (U.S. Bureau of Labor Statistics 2016). Additionally, in June 2012, approximately 2,000 female employees of Wal-Mart filed discriminatory charges against the firm with the US equal employment opportunity commission (Tabuchi, 2015). The Wal-Mart managers also try to adjust the worker's competencies and behaviors to what the corporations require through the policies and activities of the company’s strategies; supporting the HR system.
Lengnick-Hall et al. (2011) work reveals what has come to be known as the best practices or the universalistic approach to the SHRM, assumes that particular best HRM activities will enable an increase in the financial performance, irrespective of the strategic objectives of the business (Lengnick-Hall et al. 2011). For instance; the Wal-Mart, HR managers refers to its employees as the associates and motivates its employees to thinks of themselves as the servant leaders; serving others while focusing on the achieving the results in line with the companies integrity and the values. Hence, all the kinds of the HR policies as earlier mentioned are universal best practices that HR department in all best companies adopts (Syed and Jamal 2012). No wonder the Wal-Mart uses the low-cost strategy or differentiation strategy, as these policies would bring no extra cost but will motivate its employee to contribute extra on the corporate, help create ethical corporate culture, reduce more lawsuits and form an excellent relationship with the government and community (Luthans et al. 2015). Configuration approach to SHRM as theoretical model argues that there are specific ideal types of HRM system that provides both the “vertical and horizontal fit” of HRM operation to company’s strategic goals and structure (Lengnick-Hall et al. 2011). Individually, there are particular HRM systems practices those results in the highest internal complementary (horizontal fit) and internal consistency as well as congruence with organization goals (vertical fits).
Advice to improve the employment practice at Wal-Mart
Basically, from the analysis of the roles of the managers above, we know from various theoretical models, there are still many factors HR managers should improve. The resource-based view on the business resources can be a source of the competitive advantage within the retailer industry. Human capital comprises the factors such as intelligence, skills, and judgment of the enterprise’s workers (Lengnick-Hall et al. 2011).
Wal-Mart exploits its workers by numerous HR policies to low the cost to a minimum level, which would reduce the dedication and loyalty of those human resources in the firm. Similarly referring the workers as associates and encouraging the managers to think of themselves as servant shows minimal training taken to develop its valuable resources. Human capital and learning could be a core source of sustainable competitive advantage (Porter 2008). As for the particular training and developing forms, it would depend on the precise and proper time, right place and store. It is worth noting that HR managers should pay more attention to the active and long-term care when calculating the future benefits of such HR activities.
As for the contemporary employment practices, even with the contingency model of “the best fit,” there are still many opportunities for improvement (Muethel et al. 2012). It is challenging to evaluate whether Wal-Mart’s aggressive actions to bring the cost down get its strategy in the long term. The employees are complaining about its discrimination and low compensation policies, and numerous charges against the Wal-Mart globally (U.S. EEOC 2015). The communities and government are turning more sensitive to the Wal-Mart means of the aggressive action. Therefore, these bear the high cost or significant damage to the Wal-Mart’s reputation and which further will affect its long-term profitability. The company imports many products from the china and also possesses shops in less developed countries to produce goods with the Wal-Mart brand; which cultivate many problems such as business ethics and opposition from its consumers (Budhwar and Debrah 2013). Wal-Mart HR expertise would reap more by engaging long-term potential cost and with more advanced management techniques.
Conclusion
Apparently, human resource management is of strategic importance to the Wal-Mart operation, which is also the definition of the SHRM. Besides, the HR executive and senior managers should pay more attention to the employment management daily (Lengnick-Hall et al. 2011). Therefore, the managers should have affirmative roles in training and cultivate better organization culture, all of which may prove cost-saving and help realize the Sam Walton’s simple principle of the bringing more values to customers. The alignment of business plans with HR practices at Wal-Mart is so critical and difficult to manage due to complication of its many stores, the sheer number of the employees and scale of the firm. The HR challenges are attracting the talent, training them properly and providing incentive and pay that motivates them to serve a customer, and improves the retention.
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