Recommendation Of An Entry Strategy, Consisting Of A Business Structure (Entry Vehicle) And Organizational Structure For Walmart To Enter Vietnam And Operate In Vietnam.
Introduction
Walmart is the current leader in retailing and wholesaling trade business globally (Chekwa, Martin & Wells, 2015). The success of the company has mainly been fueled by its financial stability, market share, resources and revenue acquired via strategic operation and marketing. The company has positioned itself as the cost leader in the globe which has been essential in growing its market and facilitating its expansion needs (Chekwa, Martin & Wells, 2015). The retailing business is developing is a rather rapid rate as most of the established competitors are in search of strategic positioning. In this, context Walmart is required to expand and capture the unexploited market to fight the competition and retain a competitive advantage (Chekwa, Martin & Wells, 2015). The move to Vietnam will seek to create a wider market for the company to affirm its position in the global context. Joint venture and Joint marketing contracts are the recommended legal entry structures along with the functional organizational structure which will all seek to strategically position the company in the market.
Joint Venture and Joint Marketing Contracts Justification
Joint venture and joint marketing contracts were selected as the legal entry strategies because Walmart has no experience of the Vietnam market. It is proposed that Walmart should focus on Joint Venture since it has more long-run benefits than Joint Marketing agreement. In addition Vietnam as a mature market that is characterized both by local and foreign well-established competitors, it is not suitable for greenfield operations since the introduction of a new company will only play part in intensifying the already presence local competition level (Chekwa, Martin & Wells, 2015). Second based on the existing cultural and economic differences amid America and Vietnam Walmart is faced with the relative need for fresh learning and understanding the needs and preferences of the consumers, thus, market expansion via a calculated alliance is compulsory (Chekwa, Martin & Wells, 2015). Lastly, Walmart’s low pricing strategy and efficient supply are precisely was is required to modify and create a healthier industry.
Joint Venture and Joint Marketing Contracts Comparison and Recommendation
Joint venture refers to a business plan that involves two or more companies agreeing to combine their resources in order to accomplish specific objectives (Charles & Anderson, 2016). This activity can be a product of a fresh operation or continuity of business. In this alliance, all the parties are accountable for losses, revenues, and the operation but the formation is disparate from the rest of the business motives. Walmart, in this case, can engage in a joint venture in order to share its operating expenses and risks with its Joint venture firm such as Big-C which is well established and strategically positioned. In this case, the company will have the opportunity to learn from the firm regarding the market culture and consumer’s behaviors in that market. This will work to ensure that the company does not suffer risks for the lack of knowledge or experience. In addition, this will help in fighting the intense local retail competition thus ultimately positioning the market strategically. In addition, the company will be dealing with electronic specialty and therefore, based on the high operating expenses strategic entry is required because it will be offering products at the least prices which require low operating expenses. However, a joint venture is associated with objectives vagueness and flexibility restriction because equal involvement is not an option (Charles & Anderson, 2016).
On the other hand, joint marketing agreement is the scenario where one company produces products and are distributed by another (Charles & Anderson, 2016). In that, the alliance deals more with distribution and marketing (Charles & Anderson, 2016). Joint marketing is distinct from joint venture because it is more focused on trading and advertising rather than impartiality (Charles & Anderson, 2016). Both companies contribute to the needed resources and expenses. Walmart can, in this case, get into a Joint marketing agreement where it can provide products variety from its international supply to any given marketing company within Vietnam to play the marketing role. This strategy unlike joint venture which will be creating a favorable environment will seek to increase Walmart’s products perceptibility, lower marketing expenses, access to fresh markets and create consumer satisfaction. However, it is apparent that this approach will not be as suitable as a joint venture in creating more presence in the market. In addition, the company will not have the opportunity of relating to the consumers for the learning process. This alliance is mainly restricted to the trading and advertising operations which might limit Walmart’s opportunities (Charles & Anderson, 2016). In addition, more expenses will be incurred in strategically situating the company later on after adequate awareness and familiarity within the market have been generated (Charles & Anderson, 2016).
It is recommended that Walmart should utilize Joint venture alliance for its operations and entry into Vietnam. This is because the strategy is more effective because it will result in increased organizational capacity, shared resources, expenses and threats thus supporting the cost leading positing without losses, access to expertise workforce, new markets as well as wider channels of distribution (Campbell & Netzer, 2009). An essential thing for this expansion for Walmart is to increase its market and revenue generation without affecting its affordability, convenience and quality values which implies that the Joint venture will create the needed flexibility and operational capacity in the new but established market (Campbell & Netzer, 2009). In this case, a joint venture was found to be the most suitable because Walmart is required to learn about the market and the distinct culture from that of America which is associated with operating risks and local competition.
Functional Business Structure
Throughout the functional structure, the reporting associations within the organization are classified on the grounds of specialty (Cant, 2006). The structure was selected for this expansion because it is appropriate for small businesses or for those that are focused on a single product specialty. Since Walmart will be operating is a stable market then the functional structure will be effective. The specialty groups for Walmart will include Marketing, operations, account, IT and Purchasing and sales departments (Cant, 2006). This structure will seek to ensure that communication exists within the departments prior to being communicated beyond (Leondes, 2005). Debatably, the functional organization offers increased operational success since the workers with common skills, experience and knowledge are categorized collaboratively based on the responsibilities to be performed (Leondes, 2005). This implies that given that Walmart will be getting into a fresh project very group will focus on independent tasks with each manager serving as the communication center. This arrangement permits more specialization and high capacity particularly for a fresh venture (Cant, 2006). However, the structure is vulnerable to less innovation and creativity because employees are only exposed to the same kind of tasks for the longest period.
On the other hand, Walmart is not in search of innovation because it is not involved in manufacturing. This means that the company requires the specialization where the marketing department will be serving the promotion role for creating awareness and familiarity of the company’s presence and what it offers (Leondes, 2005). On the other hand, the sales and purchasing department will be managing supply, sales as well as products distributions to the needed location along with the operation department that will mainly be involved in the management of daily activity. The accounting department will be handling revenue and resources distribution while technology will be utilized to create operational efficiency. These specialties will be essential in creating efficiency for the company which will, in turn, result in reduced expenses thus supporting the cost leadership approach (Cant, 2006). In turn, the company will gain competitive positioning which is based on affordability, convenience as well as quality.
Functional Organizational Structure Chart
Conclusion
Based on the analysis above it is clear that, Walmart should focus on a strategic alliance using a joint venture instead of joint marketing. This is because the company has no experience regarding the market and the behaviors of the employees. Since, the primary objective is to use differentiation and low pricing strategies the company will be required to operate under minimal expenses and less threats which can best be lowered by a joint venture. The functional structure is the most suitable because it is categorized on the grounds of specialties such as marketing, sales and accounting which will seek to create efficiency.
References
Campbell, D., Netzer, A., & Center for International Legal Studies. (2009). International joint ventures. Alphen aan den Rijn, The Netherlands: Kluwer Law International.
Cant, M. C. (2006). Marketing management. Cape Town, South Africa: Juta.
Charles, G., & Anderson, W. (2016). International marketing: Theory and practice from developing countries. Cambridge.
Chekwa, E., Martin, J., & Wells, K. (2015). Riding On the Waves of Sustained Competitive Advantage: Consumers' Perspectives on Walmart Corporation. International Journal of the Academic Business World, 9(1), 61-73.
Leondes, C. T. (2005). Intelligent knowledge-based systems: Business and technology in the new millennium. Boston, Mass: Kluwer Academic.
Trost, T. (2013). Joint ventures: The benefits and perils - why some are successful and others fail. Place of publication not identified: Grin Verlag.
