Quality and cost? The evolution of Walmart's business strategy and human resource policies and practices in China and their impact (1996–2017)

• Author: Fang Lee Cooke,Yuhua Xie
• DOI: http://doi.org/10.1002/hrm.21931
• Date: 01 September 2019
• Published date: 01 September 2019

SPECIAL ISSUE ARTICLE

Quality and cost? The evolution of Walmart's business strategy

and human resource policies and practices in China and their

impact (1996–2017)

Yuhua Xie

1

| Fang Lee Cooke

2

1

Business School of Hunan University, Yuelu

Mountain, Changsha, Hunan, China

2

Monash Business School, Monash University,

Melbourne, Victoria, Australia

Correspondence

Yuhua Xie, Business School of Hunan

University, Yuelu Mountain, Changsha, Hunan

410082, China.

Email: xieyuhua66@hnu.edu.cn

Funding information

Australian Human Resources Institute;

National Social Science Foundation of China,

Grant/Award Number: 13BGL112

This study responds to calls for more in-depth and qualitative studies, the return to a focus on

external factors, and the inclusion of business strategy and industrial relations in human

resource management (HRM) research, as well as more research in the retail sector in the Chi-

nese context. We examine the coevolution of the business strategy and HR strategy of Walmart

(China) in the last two decades and identify tensions in the context of intensifying competition

in the Chinese retail market. We highlight the interactive effect of business and HR strategies

through a historical lens. Our study reveals a shift from the original employee-oriented win–win

strategy through rent sharing between the firm and the employees to a win–lose strategy

through the introduction of more cost conscious HR policies and practices. Findings of our study

challenge the conventional wisdom that firms adopt either the cost or quality strategy and,

along with it, the suggestion of matching the quality strategy with employee-oriented HR poli-

cies and practices, and cost leadership with a transactional approach to HRM. We argue a cost

and quality business strategy may be adopted, which requires the support of employee-ori-

ented, rather than cost-oriented, HR policies and practices.

KEYWORDS

business strategy-HR strategy fit, China, industrial relations, multinational corporations,

strategic human resource management, Walmart

1|INTRODUCTION

Clients do not come first. Employees come first. If you

take care of your employees, they will take care of the

clients.—Richard Branson

A key issue concerning the international business strategy of mul-

tinational corporations (MNCs) has been the choice of global stan-

dardization or local responsiveness. The decision affects not only the

corporate image but also the strategies of other functions such as

human resource management (HRM). Numerous studies have

revealed the motives of and challenges to transferring corporate HR

policies and practices to subsidiaries. Similarly, the bourgeoning body

of research on MNCs' HR policies and practices has highlighted the

dual influences of home and host country forces in shaping subsidi-

ary's HR policies and practices (e.g., Brewster, Wood, & Brookes,

2008). However, these studies have mostly been conducted in a snap-

shot manner, capturing HR policies and practices of the firms studied

at the time. Research evidence suggests “HRM systems co-evolve

along with business strategies”(Jackson, Schuler, & Jiang, 2014, p.

12). Despite calls for more longitudinal research by a number of

authors (e.g., Alcover, Crego, Guglielmi, & Chiesa, 2012; Aydinli, 2010;

Rowley, Benson, & Warner, 2004; Siebers, 2017; Tregaskis & Brew-

ster, 2006), long-term studies of how the HR policies and practices of

large global firms evolve over a period of time in particular host coun-

tries remain rare. For example, the evolution of HR policies and prac-

tices of an MNC may be underpinned by not only the host country's

operating environment, but also the strategic intention of the MNC

headquarters for particular overseas subsidiaries and, consequently,

the business strategy adopted by them in the host country.

Furthermore, research studies that examine the business strategy

and the HR strategy together are limited, despite “the prominence of

business strategies in early discussions of strategic HRM”(Jackson

DOI: 10.1002/hrm.21931

Hum Resour Manage. 2019;58:521–541. wileyonlinelibrary.com/journal/hrm © 2018 Wiley Periodicals, Inc. 521

et al., 2014, p. 24). For example, Jackson et al.’s (2014) comprehensive

review of research in this field revealed that only 14 of the 154 empiri-

cal studies they reviewed include a business-strategy variable, much

less try to explain the choice of strategy. The limited studies that exist

on the business strategy and HR strategy have often argued for the

benefits of best fit between the two and the importance of aligning

the HR strategy with the business strategy to yield optimal organiza-

tional performance (e.g., Bird & Beechler, 1995; Boxall, 2003;

I. H. S. Chow & Liu, 2009; Chowhan, 2016; Michie & Sheehan, 2005).

In particular, a low-cost strategy is commonly associated with a cost-

oriented HR strategy (e.g., Boxall, 1996, 1998; Cooke, 2001; Schuler &

Jackson, 1987). This is in spite of the fact that research evidence has

shown that development-oriented HR practices will enhance

employees' corporate citizenship behavior (e.g., Lam, Kraus, &

Ahearne, 2010; Snape & Redman, 2010), and that a transactional

approach to HRM will lead to reduced organizational commitment

from the employees and encourage opportunistic behavior

(I. H. Chow, Huang, & Liu, 2008; Paauwe, Guest, & Wright, 2013).

However, a transactional approach to HRM may not be conducive to

a cost-leadership business strategy where employees' performance

and behavior may not be easily monitored and where the nature of

the business requires a high level of customer interaction to provide

good services, such as retail services. As Ton (2014) argued, smart

companies would adopt a good job strategy and invest in their people

to lower costs and boost profits.

Another limitation is that extant research on HRM and perfor-

mance tends to provide only superficial treatment of organizational

culture, often as a mediator or a moderator in quantitative studies

without an in-depth understanding of how various aspects of the cor-

porate cultural values may create tensions in the business strategy

and the HR strategy. As Jackson et al. (2014, p. 14) pointed out, an

“organization's culture reflects deeply embedded values and beliefs,

which are conceptually related to HRM philosophies, but such philos-

ophies are a poorly understood element of HRM systems (Bowen &

Ostroff, 2004).”

These research gaps are significant for three important reasons.

First, changes in the business strategy at the subsidiary level may lead

to the subsidiary's departure from the corporate core values, with

broader consequences to its business performance and other organi-

zational outcomes. Second, changes in the business strategy often

trigger the corresponding changes to HR policies and practices, which

may lead to major changes in organizational culture, industrial rela-

tions (IR) climate, and workforce behavior. Such changes may alter the

corporate image in the host country, which may in turn impact its

business performance. Third, MNCs may not simply adopt a standardi-

zation or local-responsiveness strategy as a coherent organizational

strategy. Rather, they may mobilize differentiated strategies across

different business locations and subsidiaries to take advantage of local

offerings, to bypass business constraints, and to harness complemen-

tarities across subsidiaries to maximize corporate performance

(e.g., Harzing & Pinnington, 2015; Rubery & Grimshaw, 2003).

This study fills part of these research gaps through a long-term

study of Walmart (China) since it entered the Chinese market in 1996.

We chose Walmart (China) for study for three related reasons. First,

Walmart is the largest private employer in the world with around 2.3

million employees worldwide as of 2015/2016 (Walmart Corporate

Office, 2016). Its successes and failures in China may have strong

implications for its businesses in other parts of the world. Yet, Wal-

mart (China)’s HR policies and practices remain relatively under inves-

tigated in-depth and in conjunction with its business strategy, though

a few studies exist that examine Walmart (China)’s business

(e.g., Chuang, Donegan, Ganon, & Wei, 2011) or Walmart (China)’sHR

policies and practices as part of a wider study (Siebers, 2017; Siebers,

Kamoche, & Li, 2015). More broadly, existing studies of HRM in China

have focused primarily on the manufacturing sector, given its signifi-

cant role in China's contemporary economic development. By con-

trast, the service sector, especially retail as a large and an important

segment of the service sector, is much less well examined despite calls

for more research in this area (e.g., Gamble, 2010; Gamble & Huang,

2009; Huang & Gamble, 2011; Siebers et al., 2015; see also Siebers,

2011 for a more detailed account of the development of the retail

industry in China).

Second, Walmart has a large number of suppliers whose liveli-

hood is closely linked to Walmart's business and business strategy.

Third, while Walmart is in the mid-low position of the retail market

and has attracted much criticism/controversy in the United States

about its labor standards, including low pay and nonunion recognition,

it enjoyed a much more prestigious market image during its early years

of operations in China (see Trefis Team, 2014). However, changes in

its business strategy and HR policies and practices in the last decade

have seen Walmart (China) decline from being the “best employer”to

the “worst employer”in its workforce's perception. In the last few

years, the subsidiary has experienced a rising level of industrial dis-

putes in part triggered by store closures/relocations, redundancy, and

union official election. Labor conflicts in Walmart (China) have

attracted growing research attention from an IR perspective

(e.g., Blecher, 2008; Chan, 2011; Chen, 2009; He & Xie, 2012; Li &

Liu, 2016). However, little attention has been paid to the evolution of

its HR strategy and how the changes are manifested in the HR policies

and practices that might have led to the decline of the IR climate of

the subsidiary. Gereffi and Christian (2009, p. 585) call for research on

Walmart to “go global,”that is, outside of the United States, to assess

its rise, consequence, and impact on various stakeholders and the

society more broadly. With this research agenda in mind, this study

addresses the following set of research questions:

1. How have Walmart (China)’s business strategy and HR strategy

evolved in the last two decades?

2. What were the driving forces behind these changes? How might

the changes be underpinned by Walmart's corporate cultural

values on the one hand, and invoke local culture on the other as a

result of employees' response to the changes?

3. What impact do these changes have on its workforce and organi-

zational performance?

This study responds to Jackson et al.’s (2014, p. 30) call for more

research to understand “how HRM systems co-evolve along with

other aspects of organizations.”It also responds to Kaufman's (2015,

p.405) call, based on his comprehensive review of research in the

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