Unformatted text preview: . This may also confirm the weak position these stakeholders
are as against the key stakeholders.
The reaction of these stakeholders clearly reflects the extremely low levels of trust
between the firm and its stakeholders. The non-acceptance of an informal commitment
on the one hand, and the insistence of a legally-binding commitment regarding future
behaviour on the other hand, illustrate this low level of trust. 6.5 How did Wal-Mart manage the main stakeholders when entering South Africa?
As observed by Griseri and Seppala (2010) and discussed in Chapter Two, stakeholder
management involves the process by which managers reconcile the objectives of a firm
with the claims and expectations of various stakeholders. In this case, there is no
evidence of a serious attempt to reconcile the ‘claims and expectations’ of the
stakeholders with Wal-Mart’s objectives. Wal-Mart displayed no discernible stakeholder
engagement strategy during its entry into South Africa. Elg et al (2007) propose
matching as an engagement strategy when entering new markets, and illustrate how a
Swedish retailer, IKEA, successfully entered the Chinese and Russian markets by
strategic engagement with key stakeholders though matching. Their research reveals
high-level meetings between the home country and new market leaders, including
meetings between the retailer and the political leadership to address specific issues
relating to the entry. In South Africa, Wal-Mart and the government were on opposing
74 sides. What may have contributed to this situation was Wal-Mart’s leaving stakeholder
engagement to the target, Massmart. Business and government in South Africa are
notoriously suspicious of each other, a legacy of apartheid and the post-apartheid sociopolitical discourse. Though Massmart can be hardly described as a MNC, and lacks the
skills and experience of managing entry, Wal-Mart obviously thought they would be
capable of handling negotiations, being a “home” company. Having said this, much of
the anxiety surrounding the merger had to do with the entry of Wal-Mart and the
changes that would emanate from this. Wal-Mart’s reputational issues were also an
important factor that was not shared with Massmart. None of these factors could be
addressed by Massmart – they required Wal-Mart to be bold and outline how it was
going to operate in South Africa. Massmart management was (wrongly) seen as the
implementing agent for Wal-Mart policies. It was not enough for Wal-Mart to claim to
respect local laws and culture.
Wal-Mart’s engagement with stakeholders was very formalistic and not dynamic. It
seemed to conflate the legal process with the strategic questions that respond to the
social environments. The approach was in contrast to the ‘generative stakeholder
conversations’ proposed by Cooperrider and Fry (2010). 6.6 What were the outcomes of Wal-Mart’s management of the main stakeholders on entry into South Africa?
The outcome thus far has been acrimonious, with litigation between Wal-Mart on the one
hand and trade unions and government on the other hand. The question remains for
Wal-Mart, whether or not it wins the litigation, is can this be regarded as a successful
entry? The answer has to be a resounding no, for even if it wins and enters the South
African market on its own terms, it will still be required to work with the stakeholders, 75 particularly trade unions and the government. Government still possesses the power to
prescribe and change the rules of the game. With respect to trade unions, Wal-Mart had
an ideal opportunity to demystify all perceptions, rightly or wrongly, that suggest that it is
anti-union. Had it studied the South African environment carefully, it would have been
aware of the dynamic power of the unions – there is a federation of unions that
organises workers throughout the value-chain, and legislation allows for secondary
strikes. South African trade unions enjoy a good deal of legitimacy, being part of
COSATU and the broader mass democratic movement that fought apartheid and now
forms part of the ruling alliance. This amongst other things means that the unions’ voice
in South Africa is an important one – and one that is ignored at ones peril.
Wal-Mart’s stated intention of using South Africa as a springboard into Africa
necessitates it having a good relationship with, and support from, the South African
government. Entering African markets will be complex and will carry legal and political
risk, and South Africa is better placed to deal with these than Wal-Mart or the US
government. In Africa, Wal-Mart needs the South African government.
Wal-Mart appears to have fallen into the trap that most companies, according to
Ghemawat (2001), fall for, that of underestimating just how far removed they are
culturally from the markets they seek. Companies need not only pay attention to the
economic outlook of potential markets, but to the social and political outlooks too. 76 CHAPTER 7: CONCLUSION AND RECOMMENDATIONS 7.1 Introduction This chapter highlights the main find...
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This document was uploaded on 01/24/2014.
- Winter '14