The problem involves many stakeholders with different values and priorities.

As Wal-Mart tries to grow faster, numerous stakeholders are watching nervously: employees and trade unions; shareholders, investors, and creditors; suppliers and joint venture partners; the governments of the U.S. and other nations where the retailer operates; and customers. That’s not all; many nongovernmental organizations, particularly in countries where the retailer buys products, are closely monitoring it. Wal-Mart’s stakeholders have different interests, and not all of them share the company’s goals. Each group possesses the capacity, in varying degrees, to influence the company’s choices and results. That wasn’t the case in 1962, when Sam Walton set up his first store in Rogers, Arkansas.

The issue’s roots are complex and tangled.

Wal-Mart’s slowing growth in the U.S. is a consequence of, among other things, a saturated market, its customers’ limited disposable incomes, and intense competition from rivals such as Target and Costco. Wal-Mart also faces resistance to imports, criticism about the wages and benefits it offers employees, and charges that illegal aliens work in its stores. All this has generated unfavorable publicity and strengthened people’s opposition to Wal-Mart’s opening stores in urban areas. Compounding the challenge, some of the company’s advantages have turned into disadvantages. For instance, Wal-Mart’s large market share in some product categories makes it tough to grow same-store sales rapidly. Its low-cost sourcing practices have rendered it vulnerable to the health and safety concerns that surround products made in China. Its supply chain expertise doesn’t help in the case of fashion and organic products, and its low-price image hurts its ability to sell upscale products. Moreover, Wal-Mart’s deep roots in rural America are of little use in overseas markets.

The problem is difficult to come to grips with and changes with every attempt to address it.

Wal-Mart has several options. It can try to boost revenues and profits by increasing sales from existing stores or raising prices, by expanding into urban markets in the U.S., by entering emerging economies, by diversifying into upscale product lines and creating new store brands, by forecasting better, or by cutting suppliers’ margins. These strategies demand different capabilities, are risky, and sometimes conflict with one another.

Consider two of the least complex options before Wal-Mart. It could boost profits by hiking prices, but until now, everyday low prices have helped the company fend off rivals. If consumers resist higher prices, the retailer’s sales will fall and profits will drop. To prevent that, Wal-Mart must first modify its value proposition, stock some upscale products, and develop a brand persona that warrants higher prices—challenges that have little to do with boosting profits immediately. Alternatively, Wal-Mart could enter a fast-growing emerging market, as it has done in India. It has found the going tough there, however. In India, local laws don’t allow foreign companies to operate multibrand retail outlets, so Wal-Mart has had to develop a special business model: cash-and-carry wholesale stores for local retailers. Besides being unfamiliar, the strategy contains the nucleus of another problem. When India’s laws change and allow Wal-Mart to sell to consumers, it will have to compete with the retailers it supplies.

The challenge has no precedent.

The two strategies we just discussed pose completely new challenges for the company. For instance, Wal-Mart would have to alter its brand image—for the first time in its 46-year history—to justify higher prices. Its recent foray into higher-priced garments is an experiment and doesn’t appear to have worked. Similarly, Wal-Mart’s India strategy differs from the M&A strategy it has used to enter other developing countries. Wal-Mart is a novice at managing partnerships, but it has had to team up with an Indian conglomerate, Bharti Enterprises. The group, whose primary business is telecommunications, wants to tap Wal-Mart’s expertise to set up a supply chain to get Indian produce onto Western tables! Wal-Mart will have to work with India’s bureaucracy to build the infrastructure that will support its operations, but in the past, dealing with governments hasn’t been the company’s strong suit.

There’s nothing to indicate the right answer to the problem.

In Wal-Mart’s case, going upmarket could boost profits, but it isn’t easy for a discount chain to develop a relationship with higher-income shoppers. Moreover, the retailer cannot ignore its existing consumers, who shop at Wal-Mart for inexpensive products. How much of a focus on higher-margin products and higher-income customers is appropriate? The company has no way of knowing that in the beginning. In like vein, Wal-Mart’s India strategy may be an effective way to enter a number of rapidly developing economies. However, the company will lose some of its competitive advantage when it shares expertise with local partners. What’s the optimal level of knowledge transfer? That’s impossible to estimate; Wal-Mart will find out only after it has shared best practices—and possibly created new rivals.

Growth is a hard problem for many companies, but it may not always be wicked. In Wal-Mart’s case, as we have just seen, the challenge bears all the signs of wickedness.

Managing the Wickedness of Strategy

It’s impossible to find solutions to wicked strategy problems, but companies can learn to cope with them. In accordance with Occam’s razor, the simplest techniques are often the best.

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