The International Division at Walmart
When Walmart started to expand internationally in the early 1990s, it decided to set up an international division
to oversee the process. The international division was based in Bentonville, Arkansas, at the company
headquarters. Today the division oversees operations in 14 countries that collectively generate more than $60
billion in sales. In terms of reporting structure, the division is divided into three regions-Europe, Asia, and the
Americas-with the CEO of each region reporting to the CEO of the international division, who in turn reports to
the CEO of Wal mart. Initially, the senior management of the international division exerted tight centralized
control over merchandising strategy and operations in different countries. The reasoning was straightforward;
Walmart's managers wanted to make sure that international stores copied the format for stores, merchandising,
and operations that had served the company so well in the United States.
They believed, naively perhaps, that centralized control over merchandising strategy and operations was the
way to make sure this was the case. By the late 1990s, with the international division approaching $20 billion in
sales, Walmart's managers concluded this centralized approach was not serving them well. Country managers
had to get permission from their superiors in Bentonville before changing strategy and operations, and this was
slowing decision making. Centralization also produced information overload at the headquarters, and led to
some poor decisions. Walmart found that managers in Bentonville were not necessarily the best ones to decide
on store layout in Mexico, merchandising strategy in Argentina, or compensation policy in the United Kingdom.
The need to adapt merchandising strategy and operations to local conditions argued strongly for greater
decentralization. The pivotal event that led to a change in policy at Walmart was the company's 1999 acquisition
of Britain's ASDA supermarket chain. The ASDA acquisition added a mature and successful $14 billion
operation to Walmart's international division. The company realized that it was not appropriate for managers in
Bentonville to be making all-important decisions for ASDA. Accordingly, over the next few months, John
Menzer, CEO of the international division, reduced the number of staff located in Bentonville that were devoted
to international operations by 50 percent. Country leaders were given greater responsibility, especially in the
area of merchandising and operations. In Menzer's own words, "We were at the point where it was time to break
away a little bit. . . . You can't run the world from one place. The countries have to drive the business .... The
change has sent a strong message[to country managers] that they no longer have to wait for approval from
Bentonville." Although Walmart has now decentralized decisions within the international division, it is still
struggling to find the right formula for managing global procurement. Ideally, the company would like to
centralize procurement in Bentonville so that it could use its enormous purchasing power to bargain down the
prices it pays suppliers. As a practical matter, however, this has not been easy to attain given that the product
mix in Walmart stores has to be tailored to conditions prevailing in the local market. Currently, significant
responsibility for procurement remains at the country and regional level.
However, Walmart would like to have a global procurement strategy such that it can negotiate on a global basis
with key suppliers and can simultaneously introduce new merchandise into its stores around the world. As
merchandising and operating decisions have been decentralized, the international division has increasingly
taken on a new role-that of identifying best practices and transferring them between countries. For example,
the division has developed a knowledge management system whereby stores in one country, let's say Argentina,
can quickly communicate pictures of items, sales data, and ideas on how to market and promote products to
stores in another country, such as Japan. The division is also starting to move personnel between stores in
different countries as a way of facilitating the flow of best practices across national borders. Finally, the division
is at the cutting edge of moving Walmart away from its U.S.-centric mentality and showing the organization
that ideas implemented in foreign operations might also be used to improve the efficiency and effectiveness of
Walmart's operations at home.
Questions
1. Why did the centralization of decisions at the headquarters on Walmart's international division create problems
for the company's different national operations? Has Walmart's response been appropriate?
2. Do you think that having an international division is the best structure for managing Walmart's foreign
operations? What problems might arise with this structure? What other structure might work?