The long reach of lean retailing: Firm embeddedness and Wal-Mart’s implementation of local produce sourcing in the US

Abstract

With its corresponding concepts of societal, territorial, and network embeddedness, firm embeddedness offers a theoretical framework for analyzing how retailers develop strategies and business models determined by their home country context, but also adapted to new places, consumers, and networks. This paper uses firm embeddedness to examine food retailer adaptation within a changing home market, focusing on Wal-Mart’s efforts to implement local produce sourcing in the U.S. Growing consumer interest in local food has sufficiently shifted the competitive landscape within the U.S. market that Wal-Mart and other food retailers have sought to incorporate local produce into their operations. This paper asks whether Wal-Mart’s core lean retailing strategy facilitates or impedes such efforts to localize its U.S. produce supply chains. Qualitative field research conducted in 2011–2012 in one U.S. region centered on semi-structured interviews with 27 fresh fruit and vegetable producers involved in Wal-Mart’s local produce supply chains and 20 representatives of organizations facilitating commercial relationships between local growers and Wal-Mart. We find that the lean retailing model developed by Wal-Mart in response to historical circumstances in U.S. retailing and central to its present global retail dominance also limits Wal-Mart’s ability to engage in the bottom-up learning and adaptation to local contexts necessary for adjusting to the new competitive environment of local food. Wal-Mart’s centralized management and distribution systems, practices of cutting out intermediaries, and emphasis on standardization all presented some barriers to establishing the territorial and network embeddedness that could facilitate adaptation. However, we conclude that rather than simply failing to adapt to the challenges of localization, Wal-Mart applied a hybrid strategy in its local produce sourcing program. This hybrid strategy combined lean retailing—Wal-Mart’s traditional basis of competition—with selected, rather than comprehensive aspects of localization.