Reasons For Home Depot Failure In China (Case Study Sample)

Introduction
In modern businesses, culture and organisational behaviour significantly influence business success. When considering market performance or expansion, culture is a main factor in making such decisions. In international business, local culture considerably affects the business success. Hofstede (1996) contends that culture impacts everything in the business; including ways in which the employees are managed, the recruitment processes, the pace at which the business is conducted, how to conduct negotiations or resolve conflicts that arise within the business and risks management enforcement. According to Feng (2014), culture also influences change management, especially with the increasing diversity in businesses. As companies continue embracing diversity when hiring employees due to the pool of knowledge and experiences that it brings to the business, it also creates a challenging work environment due to the differences in cultural backgrounds. This had led to the paradigm shift in change management within businesses. Successful change management approaches in businesses involve analysis of the cultural differences and developing strategic methods/models to ensure the corporate culture is ideal in the target market.
Developing a change strategy can help transform an organisation from its current to an ideal culture to increase its customer acceptance or satisfaction. When implementing changes in a business, there is a need to evaluate the place of culture in the new design and involves a series of processes. According to Vergassola (2019), culture determines the business models because it involves evaluating how people communicate, how it impacts the people’s views on time and deadlines. This report presents the importance of culture in business models and organisations and how the differences in cultural practices between two countries can result in business failure. It will be based on the case study of Home Depot failure in China despite its success and growth in the United States, evaluating the differences in cultural practices in the United States and China
Culture affects how people respond to business management and authority. This is based on the power distance within the given culture and how such employees respond to authority. As identified by Hofstede (1980), it reflects how people prefer an autocratic or a democratic/consultative discussion between the management and the subordinates. The cultures with a lower power distance prefer to have frequent consultations with the management and be part of the decision making process. Such cultures view subordinate disagreements as desirable and healthy for business growth. However, autocratic cultures are those with a high power distance. Subordinate disagreements are discouraged in such cultures. Hofstede's (1980) approach also evaluates how culture affects communication and the culture of teamwork within the business. Based on individualism and collectivism approach, the former indicates that there is a greater importance in attaining personal goals, while the latter indicates a culture where collective achievements are valued. Both power distance and collectivism/individualism affects business management because there are some corporate cultures that embrace individualism because it promotes creativity and enhances employee engagement due to the motivations that come with their achievements. Individualistic culture makes companies to reward performances, making more employees to strive to achieve peak performance. However, there are companies that focus on the ways of creating a good and effective team over individual work approach. Such organisations deem team working as the most effective way to enhance creativity and productivity.
Culture plays a critical role in the organizational emphasis on individual ambitions, acquisition of wealth and a differentiated gender. Such cultures associate femininity with care and nurturing behaviours and environmental awareness. Cultural beliefs towards masculinity and femininity affect the hiring trends in some companies as they tend to view masculinity to represent assertiveness and heroism. Such attitudes affect the roles given to the employees based on the need for feedback. This is because giving feedback is a vital part of business management because it increases employee motivation. In some instances, the hiring processes are influenced by the uncertainty avoidance culture based on the predictability of the future events (Vergassola, 2019). While certain organisational management practices such as hiring of employees and how they respond to the unusual unforeseen events.
When evaluating the impacts of culture in businesses, it is vital to refer to McSweeney’s (2002) on the cultural practices in different nations that influence business operations. National cultures are influential since they determine the attitudes of the consumers and employees towards certain beliefs or actions. This can be examined based on how Hofstede (1983) treats culture as an implicit, core and shared beliefs that are territorially unique. It illustrates that the notion of culture can be based on the observable behaviours and social systems. For instance, long-term orientation is based on the cultural virtues directed to the future and the extent to which the society views the future rather than the past when solving the challenges and how the traditional beliefs influence their business decisions (Hofstede et al., 2005). From the analysis, it is clear that culture significantly influence business practices and organisation. Strong organisational and national values and codes affect how employees communicate and the strategies used to accomplish the organisational goals and missions.
Home Depot
Created in 1978, Home Depot offers home equipment to the targeted customers for designing of fixing homes. Home Depot’s primary target market is the homeowners who need tools and materials. The company focuses on customers working on the Do-It-Yourself projects and professional contractors. These are home owners who need to purchase the products to complete their own projects and installations of home equipment. The company’s main competitors in the US market include Lowes, Amazon, Home Hardware, and True Value.
Home Depot's organisational culture can be analyzed in the context of personal and group behaviours. As the biggest home improvement retailer in the US, the company has consistently used its organisation culture to maintain its competitiveness and create an attractive environment due to the high customer satisfaction rates. Home Depot's organisational culture is based on people-centricity, excellence in service and collaboration. According to Torres et al. (2019), home depot’s inverted pyramid has helped create a culture of prioritizing the stakeholders when making decisions. This organizational culture is reflected in Home depot’s managerial approach to ideas and action contributions of the subordinates. Its organizational culture also embraces excellence in the quality of services offered to the customers. It is implemented through constant training programs and human resource strategies that also hire field experts, like plumbers and carpenters. This culture has increased competitiveness and customer satisfaction. The company culture is also people-centric as it emphasizes on the importance of quality services. Due to the cultural practices and orientation, Home Depot remains as one of the fastest-growing retailers in the United States.
Home Depot in China
After, the company's success in the United States, it embarked on an international expansion, opening over 268 stores internationally. One of Home Depot's international destinations in 2006 was China. While many other reasons influenced the decision to expand to China, this report holds that China's exponentially growing economy and population offered Home Depot with great investment and growth opportunities. Other US-based businesses such as McDonalds, Walmart, and KFC, among others, had successfully established their branches across China. Home Depot entered the Chinese market in 2006 by acquiring local improvement business called Home Way in Shanghai and quickly expanded o six other cities in China. However, due to a wide variety of complex reasons, Home Depot failed and shut down its seven standardized stores in China (Carlson, 2013). The failure of Home Depot in China can be attributed to differences in the cultural orientation and perceptions between China and the United States. Below are some of the reasons for Home Depot's failures in China
Reasons for Home Depot failure in China
Incompatible local adaptation-While the Chinese consumers prefer Do-It-For-Me (DIFM) culture, Home Depot continued to apply the Do-it-Yourself (DIF), which is predominant in the US culture. The lack of flexibility in the cultural adaptation with the local consumers was one of the main causes of the failures. According to Feng (2014), many Chinese consumers are not accustomed to using self-made products due to the national generic reluctance to try something not approved by other consumers. Unlike the US culture, Chinese culture embraces what more consumers prefer. Widely accepted consumption effect is a more collectivist view on products rather than an individualistic consumption or preference for unique products. According to Feng (2013), a collectivist consumer orientation is the tendency to purchase products based on the preference of a certain reference group such as friends, family members, and relatives. The behaviours and consumption by the reference group greatly influence the consumption behaviour among the Chinese consumers. According to Carlson (2013), the collectivist approach by the Chin...