Wal-Mart Corporation’s Intercultural Management Strategy

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The last decade has been characterized by intense internationalization efforts by firms to take advantage of new growth opportunities and strengthen their competitive positioning. Cross-border supply chain integration and strategic alliances or international joint ventures have been key entry approaches to overseas markets (Cadden, Marshall, & Cao, 2013). Expansion to new locations often results in a transfer of local cultural variables and staff behavior to host country contexts. Effective management of differences in cultures and attitudes is critical to the success of multinational operations (Huang, 2016). This role requires a versatile manager with experience of working in different countries. The rationale is that a management style that is applied locally may not work in another country. Thus, internationalization calls for a new way of thinking and managing people across cultures.

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The company selected for analysis of intercultural management strategy is Wal-Mart Stores Inc., a giant American retail firm. This paper first gives this corporation’s background before analyzing its way of doing business and managing different organizational cultures in different economies. The analysis focuses on Germany as a host country for Wal-Mart. Different theories and models of intercultural management, including Hofstede’s cultural dimensions, are applied to analyze the success or failure of this company in these markets.

Wal-Mart: Company Background

Wal-Mart is a major player in the global retail industry with a broad brand portfolio. Its headquarters are in Arkansas in the US. The corporation’s product lines include “grocery, health and wellness, entertainment, apparel, and home categories” (MarketLine, 2017, p. 3). The retailer stocks private-label brands such as Mainstays and Equate at its stores. Wal-Mart runs a number of marketing campaigns, including the ‘everyday low prices’ (EDLP) program that involves attractive discounts for customers.

Wal-Mart is a leading retailer in the US in terms of market share. In 2017, its net earnings grew by 0.8% over the 2016 figure to $485,873 with 75.7% of this revenue coming from domestic operations (MarketLine, 2017). The firm’s business operations can be categorized into four major segments: Wal-Mart US, Wal-Mart International, Sam’s Club, and Wal-Mart U.S. e-commerce (Wal-Mart Inc., 2018a). It runs a network of wholesale and retail stores in different locations worldwide. It operates about 11,695 retail stores of which over 6,200 outlets are in 27 different countries (Wal-Mart Inc., 2018a). It serves over 250 million customers weekly through its establishments and e-commerce platforms and has over 400 factories located in various countries, including the US and Japan, and 147 distribution centers (MarketLine, 2017). The large store network is a key competitive strength of this retailer.

Sam Walton, the retail chain’s founder conceived Wal-Mart’s business model of providing high consumer value and service, which revolutionized the industry. Its first store was launched in 1962 in Arkansas as a family business and by 1967, the firm opened 24 outlets, generating over $12 million in revenue (Wal-Mart Inc., 2018b). The retailer was incorporated in 1969 and became publicly listed in 1970 (Wal-Mart Inc., 2018b). Wal-Mart’s first distribution facility was established in Bentonville to supply its regional stores.

The low-cost model attracted customers and business partners, contributing to its early success. Wal-Mart would later adopt novel store models such as Sam’s Club and expand its operations to other countries. Its first foreign outlet was opened in Mexico through a joint venture with a local retailer, Cifra (Wal-Mart Inc., 2018b). In the late 1990s, the company pursued an aggressive expansion strategy to countries like Canada, China, and the UK. Its e-commerce platform (Walmart.com) was launched in 2000 to target its American customers (Wal-Mart Inc., 2018b). Additional features were included in this site in 2007, allowing shoppers to buy goods online before going for them in the stores. Through acquisitions and joint ventures, Wal-Mart expanded to Europe, India, Japan, and Chile, among other locations.

Intercultural Management Strategy Analysis

From the early 1900s, ideas of nationalism and state interests began to take shape. These ideologies led to the evolution of a national culture that was unique to each country. The cultural characteristics found their way into the field of management, shaping the way companies did their business. Thus, national work attitudes and leadership styles were, largely, influenced by culture. In the era of globalization that has seen firms increase their overseas operations, an intercultural management strategy is critical.

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National Culture vs. Organizational Culture

A primary impact of globalization is the drive-by firms to go global. The rationale for expanding to other countries is to take advantage of new opportunities to grow a firm’s market share (Kargas & Varoutas, 2015). However, internationalizing businesses face the challenge of adapting to new cultural contexts. Culture is a complex concept that encompasses “knowledge, belief, art, law, morals, and customs” shared by the members of a society (Brettel, Chomik, & Flatten, 2015, p. 873). From this definition, it is clear that the factors mentioned impact human behavior in one way or another. Behavioral attributes peculiar to culture can influence the management style of its business leaders. In particular, knowledge and beliefs are key predictors of work attitudes and ethics. Theoretically, the two dimensions of culture are elements of management practice.

In the international sphere, knowledge, and beliefs are also critical. The organizational culture is adopted at all levels of the organization, while the national culture is only influential at the top management (board) context. In Hofstede’s cultural dimensions, organizational culture is considered “the collective programming of the mind” that sets a firm’s staff apart from others (De Mooij, 2015, p. 652). This view implies that organizational culture is experienced in management practice. It is a subculture of the national culture. For this reason, firms from the same country would have a similar organizational culture because of common socio-economic and political contexts.

Wal-Mart’s Intercultural Management Strategy for its German Stores

Wal-Mart’s history is characterized by international expansions through joint ventures and acquisitions. In this paper, the retailer’s entry into Germany and the factors that contributed to its failure are explored. Wal-Mart acquired Wertkauf and Interspar stores in 1997 in its bid to expand its operations to the German market (Javid, 2016). However, these outlets were not popular with local customers, limiting the American retailer’s chances of success. Furthermore, Wal-Mart injected $150 million for the refurbishment of Interspar stores, which led to additional costs after the acquisition (Javid, 2016). The retailer also experienced challenges related to labor unrest triggered by low compensation and poor working conditions.

Wal-Mart also faced significant competitive pressures from local retailers. Its vendor relations were poor compared to those of rivals and its products were not popular with German customers (Tutar, Altinoz, & Cakiroglu, 2014). Selling its products at lower prices did not influence customers to shift loyalty to the retailer. The retail chain also experienced legal hurdles related to competitive strategies. According to Tutar et al. (2014), German laws prohibited big firms from lowering prices without justification. Therefore, the retailer faced a host of legal, economic, and financial constraints upon its entry into Germany, resulting in its exit in 2006.

The national culture was also a critical success factor in Wal-Mart’s German operations. According to Baines (2015), there was a mismatch between the retailer’s organizational culture and that of Interspar and Wertkauf, impeding a successful cultural integration. First, Wal-Mart managers were not fluent in German and thus experienced language barriers when supervising local employees. As a result, the management efficiency of the corporation’s store was affected. Baines (2015) identifies language, religion, and education as important sociocultural variables that impact cultural integration in addition to national factors such as legal, economic, and political systems. At the organizational level, employee attitudes towards work, time, and change as well as motivation and commitment differ across cultures. Thus, understanding the national culture of the host country before establishing overseas operations is a critical success factor. Wal-Mart’s misadventure in Germany best exemplifies this scenario.

Hofstede’s Cultural Dimensions

Cultural differences between countries can be understood using Hofstede’s framework. Technological developments in the era of globalization have increased cross-border communication and collaboration. While working in multicultural environments has some benefits, managing people from different cultures can be a challenge. Hofstede defines five cultural dimensions that are useful in developing an intercultural management strategy (Hamza & Nizam, 2016). Applying this framework to Wal-Mart will show how the retailer’s U.S. strategic plan and practice failed to work in its host country (Germany).

Hofstede’s model is based on the assumption that national culture influences corporate practices and employee behavior and attitudes (Hamza & Nizam, 2016). Thus, an understanding of the cultural impact on management and group performance is a critical success factor in foreign operations. On the other hand, limited awareness of this reality often results in the failure of international ventures. Hofstede’s theory was developed after a survey of IBM staff in different nations that identified five critical areas (Hamza & Nizam, 2016). They include “power distance, uncertainty avoidance, individualism/collectivism, masculinity/femininity, and long-term orientation” (Hamza & Nizam, 2016, p. 3). These variables reflect dissimilarities between any two national cultures.

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Power distance describes perceived social disparities unique to a given cultural context (Hamza & Nizam, 2016). Individualism refers to personal self-sufficiency and autonomy. In contrast, the masculinity/femininity dimension reflects the gender role categorization where men are expected to take up competitive tasks and leave affectionate ones for women (Hamza & Nizam, 2016). Uncertainty avoidance refers to the feeling of being vulnerable when in foreign situations. Lastly, long-term orientation is the degree to which a cultural group focuses on the future as opposed to concentrating on the present.

Applying Hofstede’s model to Wal-Mart can reveal how the weaknesses of this retailer’s intercultural management that led to its failure in its host country. Dissimilarities between the national cultures of German and the US are shown in Table 1 below. The most significant differences between the two countries’ scores occur in three dimensions: uncertainty avoidance, power distance, and individualism. Weaknesses of Wal-Mart’s intercultural management strategy can be uncovered by analyzing these variables.

Table 1. (Hamza & Nizam, 2016).

Dimension Score
USA Germany
Power distance 40 35
Individualism 91 67
Masculinity/femininity 62 66
Uncertainty avoidance 46 65
Long-term orientation 29 31

Uncertainty avoidance

Germany ranks high in this dimension compared to the US. Therefore, Wal-Mart’s misadventure in Germany can be attributed to its personnel management practices. Looking at the differences in uncertainty avoidance between the US and Germany, the American approach to managing employees was not optimal for a German workplace. For instance, the morning exercise sessions by Wal-Mart staff to improve morale may have been construed as irritation by the host nation staff (Hamza & Nizam, 2016). In contrast, from an American perspective, this practice may be considered an ideal measure for promoting loyalty and team spirit.

Another aspect of Wal-Mart’s personnel management that was inconsistent with Germany’s high uncertainty avoidance score was the corporation’s ethical code. The practice of reporting cases of employee misconduct to the authorities for disciplinary action may be ideal in the American context but not in Germany (Shurrab, 2014). Furthermore, Wal-Mart required its cashiers to be welcoming and cordial to customers. However, according to Nazir, Shah, and Zaman (2014), the practice of smiling to shoppers is uncommon in the host country culture. Therefore, German employees unfamiliar with this custom were uncomfortable and stressed. Due to these practices, the locals did not consider the retailer an ideal employer, resulting in a high turnover that affected the company’s competitive position.

From a consumer perspective, Wal-Mart’s approach to intercultural management did not fit the average German buyer’s tastes and preferences. According to Javid (2016), the retailer’s outlet in Germany was modeled according to the American shopping experience. It did not reflect the national culture that German customers were accustomed to in their country. Similarly, the design and arrangement of merchandise in the stores were not consistent with consumer expectations. For example, premium-priced goods were strategically placed to catch the shopper’s attention, while discounted ones were located on top shelves (Javid, 2016). Thus, the store layout was different from that of local retailers.

Additionally, the shopping experience in the stores was more American than German. As Javid (2016) writes, for local buyers who often spend less time shopping than their US counterparts, Wal-Mart’s expansive design must have been time-consuming. The retailer’s American outlets are spacious, which is a strategy to boost sales. However, for German customers, the approach was unfriendly and annoying (Javid, 2016). Further, Wal-Mart’s packaging of its products in plastic bags was inconsistent with the local shopper’s environmental values. Thus, lapses in integrating the local culture into the retailer’s vision and mission for its store in Germany reduced the number of customers it could attract and retain, resulting in suboptimal performance.

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Power distance

This dimension reflects the inequalities between the privileged and disadvantaged groups in a society. The power distance in the American culture is larger than that of the German cultural context. Wal-Mart’s store in Germany was based on the US hierarchical decision-making approach (Venaik & Brewer, 2013). In contrast, the organizational culture of German companies involves collaboration between employee clusters as opposed to relating along with a power structure. A greater power distance in an organization results in a disparity in status between the staff cadres (management vs. subordinates). In this respect, German workers found it uncomfortable working at Wal-Mart because of its hierarchical structure.

Decision-making in organizations with a larger power distance often involves a top-down approach. Workplace guidelines that each employee is required to follow are developed at the board level and passed down to the management for implementation (Venaik & Brewer, 2013). This approach ignores the input from subordinate staff. Thus, local workers at the retail store were forced to practice guidelines and follow the pecking order, limiting coordination and involvement at the lower levels. Wide differences in wages between the management and subordinates, a characteristic of entities with large power distances, might have also reduced the motivation of German employees. Wal-Mart’s operations in Germany were characterized by labor unrest and strikes by local workers demanding better wages and working conditions (Javid, 2016). Therefore, the retailer’s inability to bridge the power distance between the American and German cultures led to issues of industrial action and staff turnover.


From Table 1, individualistic ideas are more valued in American culture than in Germany. Thus, German workers would subscribe to the doctrine of collectivism in realizing organizational goals. The large difference in individualism between the two cultures implies that Wal-Mart may not prioritize activities that promote teamwork or cooperation. According to Venaik and Brewer (2013), English was adopted as the official language in the retailer’s German outlets, creating communication barriers between employees and customers. The policy also affected staff motivation and team cohesion.

Individualism in an organization cannot pull people towards the same direction. Late adopters of the firm’s organizational culture may not perform well in such a situation. For Wal-Mart, employee orientation to the American workplace culture was poor (Javid, 2016). As a result, German workers were unfamiliar with organizational practices and guidelines. Their performance was affected because the individualist approach to tasks and projects was inconsistent with the host culture’s collectivist orientation.

Trompenaars and Hampden-Turner (THT) Model

This framework is founded on Hofstede’s model. It considers historical and sociopolitical variables specific to a culture that impact business values (Venaik & Brewer, 2013). In this regard, the THT model is an important tool for analyzing cultural differences. This framework defines national cultures based on the problem-solving approaches of the members. It identified three cultural variables: “relationships with people, attitudes towards time, and relations with the environment” (Venaik & Brewer, 2013, p. 473). The model is important in relating different facets of culture with organizational behavior.

The THT model is used to examine differences between cultures in relation to time, people, and environment (Baines, 2015). It is premised on the view that the diversity of products and services in the marketplace demands that the management focuses on the employees’ cultures. The rationale is to address cultural dilemmas that may affect the performance of a multicultural workforce. Based on the THT framework, subtle differences between the US and Germany can be noted. In relation to universalism versus particularism, both cultures emphasize a universal application of rules and standards (Causin & Ngwenya, 2016). However, the legal landscape in America differs from that in Germany, posing challenges to multinationals. For example, German courts determined that Wal-Mart’s pricing strategy (low prices) was an unfair competitive practice (Causin & Ngwenya, 2016). This legal hurdle placed the retailer in a cultural dilemma, and as a result, it had to abandon its low-cost approach to comply with host country regulations.

The next dilemma that Wal-Mart faced was a socio-cultural one. According to Baines (2015), religion, education, and language impact management practice. The American executives managing Wal-Mart’s operations in Germany did not speak German (Baines, 2015). Further, English was adopted as the language of communication in the stores. Thus, applying the THT model’s environmental dimension, this decision led to resistance to change. The language policy was adapted from the US cultural environment, and therefore, it was not well received by Wal-Mart’s German employees, which led to conflicts.

Cultural factors, including norms and attitudes, are crucial elements of national cultures. From the THT model, these variables influence attitudes towards “time, work, change, individualism, and materialism” (Mba, 2015, p. 88). They also shape individual behavior, morale, and workplace relations. Complete cultural integration did not occur in Wal-Mart’s acquisition of Werkauf and Interspar, which affected the above outcomes. According to Javid (2016), in German, retailers are required to open for a weekly maximum of 80 hours and remain closed on Sundays and national holidays. Furthermore, former staff members of Interspar were not accustomed to a centralized form of management. Therefore, the retailer did not consider the cultural factors that influence German attitudes in developing its policies and guidelines, resulting in poor workplace relations.

Disturbances in the internal environment constitute another problem that the employees faced. Under the THT framework, a cultural dilemma related to specific versus diffuse attitudes is characteristic of a multicultural workforce. The German organizational culture is oriented towards giving advice while the American one centers on policymaking (Eisend, Evanschitzky, & Gilliland, 2016). Thus, local employees working in Wal-Mart’s stores may have found the retailer’s approach unsatisfying. Javid (2016) also reports that prior to the acquisitions of Interspar and Wertkauf, the managers’ expenses on official activities were not restricted. The retailer decreased its outflow accounts after the takeover.

From a consumer perspective, some of Wal-Mart’s strategies did not meet local expectations. The THT model (neutral vs. affective) can be applied to this scenario. German culture does not value an overt expression of emotions, which means that it is neutral (Causin & Ngwenya, 2016). Therefore, Wal-Mart’s store policy that cashiers had to smile while serving shoppers was a little disconcerting. The corporation’s unawareness of these cultural differences resulted in workplace rules and regulations that its German employees considered strange and exotic.

Inappropriate Management Style

Eisend et al. (2016) found a strong relationship between the management approaches of top managers and organizational success. Among all leadership styles, the autocratic model is regarded as the least effective because it is rigid, hence, unsuitable for dealing with cultural issues. Furthermore, applying the autocratic approach can increase staff turnover because of noninvolvement in decision-making (Khan et al., 2015). In the context of Wal-Mart’s German stores, the use of inappropriate leadership style may have led to the exit of valuable employees, depriving the retailer efficiency and operational capacity. Javid (2016) observes that the company’s management approach was not participative. The interests and culture of its local employees were not considered in organizational policies and guidelines. For example, the morning exercise routine was not received well by the staff, as it was a unilateral decision (Javid, 2016). The German employees could not perform well in an authoritarian environment.

Pressuring host-country workers to embrace unfamiliar practices was another mistake Wal-Mart’s management did. German cashiers were unaccustomed to smiling at customers and bidding them goodbye after each encounter (Hamza & Nizam, 2016). Therefore, this policy affected their morale because they were forced to embrace the values and ideals of an unfamiliar culture. The working conditions were also not favorable to German employees. The wages and benefits implemented by the retailer were not adequate for the number of shift hours, resulting in waves of labor unrest (Baines, 2014). The compensation structure that Wal-Mart adopted for its German staff was similar to the one it used for its American employees. Further, the retailer had a strict code of ethics and sanctions that are typical of autocratic leadership. As a result, Ver.di, a German trade union sued the corporation for failing to disclose the financial results publicly as a basis for salary negotiations (Baines, 2014). Thus, Wal-mart’s take-it-or-leave-it attitude affected staff retention and its competitive position in Germany.

Wal-Mart was also rigid in its management of the German stores. The company adopted the American practices in Germany while disregarding domestic values and views (Baines, 2014). Therefore, its management strategies were not favorable to its German employees. Javid (2016) reports that US managers at Wal-Mart Germany required local executives to adopt American practices such as rules against flirting at the workplace. These policies created internal friction between the management and subordinates. Other American practices that were not received well by German employees included video surveillance and unpaid overtime (Javid, 2016). Thus, the management style applied to Wal-Mart’s German venture affected staff performance and sales, forcing the corporation to fold up its operations in Germany.

Intercultural Management Strategy in Other Countries

Wal-Mart’s rapid expansion strategy has seen it set up operations in 27 nations (Wal-Mart Inc., 2018a). Mexico is one of the first countries where the retailer has an almost ubiquitous presence. Wal-Mart de Mexico has grown to over 1000 stores in major Mexican cities (Matusitz, 2014). From a customer perspective, the corporation’s competitive strategies have contributed to cultural integration. It has introduced payment with credit cards, which is a common practice among US retailers. This strategy is critical to the corporation’s future growth in Mexico and other markets.

In addition to promoting credit card use, Wal-Mart has introduced micro-lending platforms that charge high-interest rates for its Mexican customers (Matusitz, 2014). The retailer has opened banks in most of its outlets to penetrate this market. Thus, Wal-Mart’s venture into Mexico has led to a hyper-consumerist culture. The flip side of Wal-Mart’s success relates to its human resource practices. The retailer business model is that of high productivity and poor wages, which allow it to offer lower prices (Baines, 2014). It usually employs Latin American executives to manage Wal-Mart de Mexico. These managers can take less pay than their Mexican counterparts can (Baines, 2014). Thus, the retailer’s hiring practices are likely to affect intercultural integration and resistance from its local employees.

Another country where Wal-Mart has its operations in China. The retailer first entered this country in 1996 before building its second-largest outlet globally in 2006 (Matusitz, 2014). The corporation has managed to integrate the American lifestyles (low-context) into the local high-context culture. Matusitz (2014) writes that the retailer’s stores in China carry over 20,000 products drawn from different categories, including apparel, footwear, and electrical appliances, among others. The same outlet design (department store combined with a supermarket) is found in Wal-Mart’s home country – the US.

The retail market in China is highly fragmented. It features small outlets and few large retailers with most businesses being family-run (Mba, 2015). Wal-Mart has capitalized on modern logistics and supply chain methods common in the US to compete well in the Chinese market. However, the company has also relied on cheap labor to cut costs. According to Matusitz (2014), accusations of poor wages and long working hours (16hr a day) have been leveled against this retailer. The company’s emphasis on improved productivity as a strategy to provide lower prices has enabled it to perform relatively well in the Chinese market. However, complaints of exploitation from its local employees are an indication of the retailer’s autocratic leadership style.

Wal-Mart declined to engage employee unions in negotiations to come up with a collective bargaining agreement that would improve the terms of service for staff (Matusitz, 2014). The retailer understood that the Chinese trade unions are not as influential as those in the US are, and therefore, it refused to honor calls from these organizations. Locals may perceive this behavior as unbecoming of a big multinational. The retailer has also been accused of improper disposal of wastes in water bodies to cut costs. Overall, Wal-Mart’s intercultural management strategy in other countries has been geared towards increasing cultural convergence to drive its growth.


Effective intercultural management requires the integration of cultural values of the host country in a subsidiary’s mission, vision, and objectives. Aspects of culture, such as attitudes, norms, and customs, influence individual and organizational behavior and practices. From the analysis, gaps in Wal-Mart’s intercultural management strategy for its German stores increased employee turnover and labor unrest, resulting in its exit from this host country. However, the retailer’s operations in other countries, such as China and Mexico, are geared towards greater cultural integration, contributing to its success in these markets.


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