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Designing a Basic Compensation Plan for Wal-Mart in China

Introductory Analysis in which you succinctly address (2 pp.):
A.Wal-Mart's strengths and weaknesses regarding compensation
B.Issues regarding compensation plans for international companies in China
C.Implications of unionization on Wal-Mart's compensation plans in China
2.Outline basic elements of your suggested plan, your rationale for each element, and how each element addresses the challenges that you have identified above (2-4 pp.). Elements of your plan should include (see the compensation link in the background readings for additional details):
A.Objectives that you recommend for the compensation program
B. Who should be involved in overseeing the program's design and implementation?
C. Compensation philosophy:
i.Compensation committee - who should be involved? How should it work?
ii.What, if any, differences should exist in pay structures for executives, professional employees, sales employees, hourly versus salaried employees, incentive-based versus non-contingent pay (i.e. salary), China national vs. expatriate employees.
iii. Should the company should set salaries at, above, or below market, and according to which market(s) standards? China local, China national, international, etc.?
iv.What types of compensation should be included in the plan, and which are most important? To what extent should non-cash incentives and/or benefits replace or supplement cash compensation? Should Wal-Mart use cash incentives in addition to salaries, and if so how?
3.Summation (1-2 paragraphs): How will your plan help Wal-Mart successfully compete to attract and retain qualified employees in the increasingly tight China labor market? How will it address the issues Wal-Mart is facing in China?

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Founded in 1962 by Sam Walton, Wal-Mart followed an amazing pattern of success and growth, eclipsing all other U.S. department store retailers by the early 1990's. It employs over 1 million people in the United States at 3,400 stores and 1.4 million people worldwide at more than 4,500 retail units in many countries including United States, Mexico, Puerto Rico, Canada, Argentina, Brazil, China, etc.
Sam Walton, the founder of Wal-Mart, opened the first Wal-Mart store in Rogers, Arkansas in 1962. The company is publicly traded at the New York Stock Exchange under the symbol WMT and has its headquarters in Bentonville, Arkansas.

Wal-Mart operates as an aggregator, distributor, and retailer of consumer goods. It
organizes its business into three principal segments: Wal-Mart Stores, SAM'S CLUB and International. The Wal-Mart Stores segment is the largest segment of Wal-Mart's business, accounting for 67.3% sales during the fiscal year ended January 31, 2005 (fiscal 2005). The segment consists of three different retail formats, all of which operate in the United States. The Company's SAM'S CLUB segment consists of membership warehouse clubs that operate in the United States, and accounts for 13% of fiscal 2005 sales. In addition, the Company owns an unconsolidated minority interest of approximately 37% of The Seiyu, Ltd., a retailer in Japan.

A. Wal-Mart's strengths and weaknesses regarding compensation

Management involves the development of organization systems and practices for the planning, acquisition, development and utilization of manpower. It involves developing a symbiotic relationship between the external, societal culture and internal culture of the organization. This will enable the upholding of the relevant external values, as well as contributing new values such as productivity and innovation through modeling by the organization. Globalization of the economy challenges virtually all employees to become more internationally aware and adept.

Employee Training & Loyalty
Each Wal-Mart store has an employee, often an older person, known as a "greeter", whose primary responsibility is to welcome people to the store. The training video You've Picked a Great Place to Work promotes the "essential feeling of family for which Wal-Mart is so well-known." Employees start the workday with a gathering and the "Wal-Mart cheer".

Wal-Mart refers to its employees as "associates," and encourages managers to think of themselves as "servant leaders." Each shift at every store, club, and distribution center (theoretically) starts with a store-wide meeting where managers discuss with hourly associates daily sales figures, company news, and goals for the day.

All Wal-Mart stores in the United States have employees referred to as "People Greeters." They welcome people to the store and help prevent shoplifting. At Sam's Club these employees inspect the contents of the shopping carts of exiting customers.

U.S. Senator Hillary Clinton (Democrat, New York) formerly worked as a lawyer for Wal-Mart and also served on its Board of Directors. Thus their environment is a family like.

It is facing high employee turnover, gender discrimination problem, Union problem
The target of persistent unionizing efforts, Wal-Mart aggressively resists union attempts. On several occasions, the company has been found to have acted illegally to prevent unionization. Wal-Mart is alleged to have fired workers sympathetic to unionization and has closed stores and departments after workers have voted to unionize. The company shows anti-union videos in an effort to discourage unionization.
As with many US retailers, Wal-Mart experiences a high rate of employee turnover (approximately 50% of employees leave every year, according to the company). Although they average nearly double the federal minimum wage, wages at Wal-Mart are about 20% less than at other retail stores. (Wikipedia)
Thus their compensation is less than the competitors.

B. Issues regarding compensation plans for international companies in China

The Chinese economy began to shift from Marxism to a market economy when Deng started the economic reforms, which encouraged profit incentives, market competition and reduced the scope of planning. The objective of the strategies were the four Modernizations in Agriculture, Industry, Science, and National ...

Solution Summary

The solution designs a basic compensation plan for Wal-Mart in China.