Though it became a global company long ago, Wal-Mart has historically run its operations from its Bentonville, Ark., headquarters. But management experts say the command-and-control approach practiced by many companies—which leaves little decision making to local store managers—won’t cut it in today’s partner-driven world.
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When you are big and global, there are “more vulnerabilities and points of disruption” to your operations, says Hau Lee, the Thoma professor of operations, information and technology at Stanford University’s Graduate School of Business. Companies have to adjust by balancing local flexibility with centralization.
If a shipment is delayed in a foreign country, for example, local managers are in a better position to respond than managers back at headquarters. Lee says: “The important task of information systems design is to allow those local actions and decision making. But the local actions and decisions that are made must come back to the centralized system.” Top execs still need to know what’s going on, after all.
For retailers, enabling local decision making gives store managers the ability to react to what’s selling and work with its suppliers more efficiently, says Bobby Cameron, a principal analyst at Forrester Research. Store managers can “continuously shift the product mix in specific stores and in specific classes of neighborhoods to reflect each location’s particular retail interests,” Cameron notes.
Analysts attribute Wal-Mart’s retreat from South Korea and Germany, for example, to an insistence on doing business the Wal-Mart way. Cameron says Europeans may not have wanted to adopt Wal-Mart’s IT standards because they prefer industry standards and common interfaces that work for different business process models.
“It is now a global conversation,” Cameron says. “And as a company like Wal-Mart becomes part of global networks—and no longer is the dominant player that tells everybody what to do—they are more brokers than in command.”