Structures and systems should not merely be consistent with each other, but also consistent with the environmental context in which the company operates and the corporate strategy in the international environment.
Wal-Mart stores are committed to EDLP (every day low prices) strategy, thus becoming a cost-, and efficiency leader among international retailers (Hitt et al, 2003, pp. 348-351). Wal-Mart’s structure represents a mixture of organizational forms (Ball et al, 2005, p. 516). The company’s international hybrid organization is a combination between a structure, organized by functions (e.g. centralized supply and distribution) that are US-centrally controlled, and based on geographical regions in its external operations. Centralized logistics and consolidated distribution strategy, linked directly with supplier-manufacturers (Ramaswamy, 2004) are a key strength behind Wal-Mart’s low-cost strategy and negotiation power. Additionally, segments based on company operations in the US and in total for its international units are identified (Annual Report, 2005, p. 24), whereby corporate headquarters are located in Arkansas, US. and the international division is considered as complementary to the core US business.
The cost-leadership strategy involves the establishment of a cost-obsessed organization that supports the company’s low-cost operations. A functional structure encompassing key activities as supply or distribution also involves simple reporting lines, few layers in authority and decision-making, and centralized corporate staff. In that aspect, the functional divisions at Wal-Mart represent a successful organizational model that supports Wal-Mart’s superior position as a low-cost leader. The company has employed a flat organizational structure with store managers playing pivotal roles in linking management personnel […] with field operations (Ramaswamy, 2004). Additionally, Wal-Mart locates overseas stores where it is business model and low-cost philosophy is likely to succeed, namely countries that offer low-wage labor, low-income shoppers, and few social protections (Konzellmann et al, 2005).