Strategic management and Walmart

Organizational ContextWal-Mart Stores Inc. or Walmart is a multinational retail organization that has numerous chains of large discount warehouse and general stores. The company was formed in 1962 by Sam Walton as a family-owned business. It was incorporated in 1969 and traded on the Stock Exchange of New York publicly in 1972.

Since then this organization has grown strength to strength winning various accolades. In 1988, it was ranked as the most profitable retail business in America outselling competitors such as K-Mart and Sears in the retail business (Fishman, 2006). It was founded on Sam Walton’s quest for providing goods and services at relatively low or discounted prices.

The Walmart principles have been hinged on cost-cutting while at the same retailing goods at consumer-friendly prices. The organization too, has been hailed for its global standard efficiency and business innovations. It was one of the first corporations that integrated use of computers in its operations in all its branches. The mission statement reflects on the founder’s business model of passing savings to his clientele and amassing profits through volume sales. This principle has made consumers feel more welcome and their needs taken care of over the years.

The cost-cutting initiatives embraced by the company operations have been as a result of this old age philosophy Walmart has spread its wings world over opening up over 8,500 branches operating under 55 different brands. The company has wholly owned corporations in North America (Canada) and South America (Argentina and Brazil). In Mexico, Walmart operates under the brand Walmex, in the UK as Asda, Seiyu in Japan and in India it is known as Best Price.

The Walmart discount stores mainly deal with a selection of groceries and general merchandise. Many of these stores have pharmacies, Tire and Lube Express, bank branches, cell phone stores, fast food joints and garden centers. It has also a diversified approach to the market venturing in entertainment, private label brands, technology, warehouse club chains, express discount stores, hypermarkets and general supermarkets. Business Environment

Task EnvironmentCustomers:Walmart establishes a customer service that is based on self-service which is automated. This organization tends to reach its clientele-base through mass customization. The customers are categorized into three groups: value shoppers, price-sensitive effluents and brand aspirations. The value shoppers comprise of customers who prefer low prices and cannot shop beyond their financial reach. The price-sensitive effluents are wealthy customers who love deals. The last group is the brand aspirations-clientele which encompasses low income shoppers that are enthusiastic about brands (Schermerhon, 2011). Suppliers:

In maintaining the objective of low affordable prices, Walmart employs a centralization purchase of supplies. This is where the franchise transacts in its headquarters in order to cut on cost. Walmart also adopts a strict policy which does not allow over 2.5% supply in order to curb overdependence on manufactured products.

The organization also requires its suppliers to attach RFID (Radio Frequency Identification) technology to their goods deliveries (Fishman, 2006). In the spirit of cost-cutting, the corporation adopts a closer cooperative approach to transactions with its suppliers in order to lower costs that arise due to the inventory process. Competitors:

Walmart faces stiff competition from other corporations in its global market but has always stayed ahead of the pack through innovation, strategy and differentiation. The retail organization employs a private satellite network in its point of sales transactions transmissions. This makes it have an edge over its competition in terms of efficiency in operations. Its low cost strategy has endeared it to many customers and hence it’s ever increasing popularity in the global market. It has also enhanced product differentiation by venturing in various lines of trade.

This has made it become the ultimate choice for many customers as a variety of quality goods and services are accessed under one establishment. Its high number of stores world over has made it an enviable brand that has penetrated in differentmarkets with tailored products. Regulatory Group:

Walmart as a multinational brand employs internal self regulation through its regulatory group, the Global Ethics Office. It has a Statement of Ethics that govern its operations worldwide with associates and third parties (Fishman, 2006). The associates in this case are citizens of different nationalities who are subjected to different customs, cultures and laws. Third parties covered in this statement are consultants, suppliers, law firms, contractors, public relations firms and other service providers.

This statement of ethics provides rules and regulations that govern all relationships and operations that the organization partakes. The Global Ethics Office receives ethical concerns and issues that face the organization and has mechanisms to ensure that Walmart enforces discipline and quality delivery of services. It also takes into consideration customer complaints and suggestions. General Environment

Economic Environment:Despite several cyclical economic downturns, Walmart has continued to record sales growth. The company’s global associates have been doing relatively well in terms of sales and job creation. This financial year alone, this multinational corporation associates have recorded an 11% growth in sales translating to $6.4 billion. The organization has had a notable impact on the welfare of shoppers globally.

A study carried out in 2005 by Massachusetts Institute of Technology established that the Walmart had a great impact on the poor people’s consumer welfare through the provision of discounted retail services (Framholtz et al, 2011).The discounted retail prices enable this segment of the market acquire essential products necessary for their survival. It is prudent to say that Walmart has been a critical socio-economic organization as it takes into considerations all the levels of consumer segments. Social/Cultural Environment:

The Walmart objectives have since time immemorial been geared to their segment of low-income customers. This has been reflected in its headquarters and associates nature of housing and operations. The Walmart organization employs minimal décor and warehouse style of buildings that embodies the company’s quest to maintain a frugal image. Frugality is a core principle in the company and all its associates are expected to integrate this value in all its manifestations.

The company has ensured local communities are incorporated in its operations through homogenizing of the market place to the local popular culture dictations. This is a prime tool in making Walmart affiliates have a local touch and attachment with its clientele base. The community feels it has a stake in the brand psychologically. Political /Legal Environment:

The company has found itself in politicking scenarios where women in Walmart were discriminated by being denied supervisory and managerial roles. The company however has continuously itself from blame itself by citing personnel recruitment and promotion was decentralized.

This issue has generated legal suits as Dukes v. Walmart Stores of 2007 which alleges women workers were being discriminated on issues touching on promotions and pay. Walmart, however, won this case as the court ruled that the plaintiffs had less in common to make a class that could validate the class action suit. In early 2006, Walmart stated that it would diversify its efforts in the inclusion of the minorities such as women and gay employees in the management structure (Framholtz et al, 2011).

This move was highly welcomed due to the increase of the diverse demographics of the employees and stakeholders in the brand. The brand was able to come out less scathed from bad publicity generated by the legal suits. Technological Environment:

Walmart has been taunted as a leader in technology use as a means to maximize operational efficiency .Technology has been integral in the Walmart entire supply chain. Each stage of the value chain is efficient which allows prompt supply of the right products at relatively low cost to its end-customers. The company’s deployment of private satellite network has been instrumental in the point of sales transmissions of the company’s day to day transactions. These transactions are tracked with ease and accounted for on a timely basis.

Communication of decisions, policies and managerial decisions is also communicated effectively to all Walmart branches and stores worldwide through the private satellite network. The insistence on the use of RFID (Radio Frequency Identification) technology by its suppliers is also a technological stride that allows cost-effective inventory logistics system. The RFID entails use of electromagnetic waves in order to enable identification and tracking of delivered products. It also employs information and communications technology in the decision-making process with its interlinked stores and associates world over, and effective response to consumers.

Organization’s Mission/Vision And Goals Mission: The mission statement of the Walmart organization is summed up as “We save people money so they can live better”. Every operation that Walmart embarks on must be ultimately, in one way or another to this mission statement. This statement helps shape the main focus of every Walmart associates, personnel and management. The statement is short and concise summing up the core value that the company has stood for since its conception (Fishman, 2006). The mission statement reflects the founder, Sam Walton’s business model of passing savings to his clientele and amassing profits through volume.

This principle over the years has made consumers feel more welcome and their needs taken care of. The cost-cutting measures incorporated in the company operations have been as a result of this old age philosophy. The organization has integrated technology in its transactions with suppliers and consumers Wal-Mart’s value proposition is based on offering low prices to customers and convenience by providing a wide range of products under one roof. This not only saves customers money but also time. The organization further communicates to its customer segments with its distribution channels which are owned and direct and less costly.

The internet is a major tool that the organization uses as it has a low cost and corresponds by the Walmart mantra of cost-effectiveness. Its cost structure is also favored by economies of scale that ensure cost reduction in operations and consequently reduced prices that end-customers enjoy. The financial discipline of this multinational corporation is well known through the passing of operating costs to suppliers. Organization’s Strategy

Its Relationship with Organizational Goals and Mission/Vision Walmart as an organization employs the cost leadership strategy. The company is committed to experimentation and its key suppliers have become key business partners, sharing the technical and business risks, integrated into the company’s planning process (Framholtz et al, 2011). This is in line with the organization’s mission statement that focuses on saving people money while impacting positively on the general welfare.

The cost leadership strategy ensures the advantages accrued by operating organization’s business in a cost-effective way are transferred to customers at affordable prices (Daft, 2010). Its Relationship with The Environment In Which Organization Exists  The organization’s internal and external business environment is greatly impacted by the cost leadership strategy.

Walmart has a firm infrastructure that is characterized by cost-effective management IT systems, few managerial layers in order to ensure overhead cost-reduction and simplified planning procedures to enhance planning-cost reduction. The Human resources management has consistent policies that see to it reduced turnover costs are achieved.

The personnel management also ensures that the Walmart employees undergo effective training programs to promote efficiency and effectiveness in service delivery and achievement of the organizational goals (Quelch & Depande, 2004). Technology development is also a core part of this well thought out cost leadership strategy. The technology in use in the Walmart chain of retail stores is easy to use and instrumental in the reduction in the organization’s manufacturing process.

The procurement process in this organization is tailor-made to find the lowest-cost and acceptable quality products to acquire as raw materials. The procurement also allows regular evaluation of the supplier’s performance to ensure that low cost and quality goods are acquired by the firm.

Organizational StructureAppropriateness of Structure to the Environment, Objectives, And Strategy The organizational structure specifies the firm’s formal procedure controls, reporting relationships, authority, and decision-making process (Hitt, 2013). Walmart, due to its size as a multinational organization, uses a multidivisional organizational structure. This structure is comprised of different operating divisions each representing a separate business or profit center in which the top corporate officer delegates roles and business-unit strategy to division managers.

The decision-making process is centralized where the central home headquarters the landmark decisions on areas such as merchandising, advertising, buying, promotion, warehousing, product development, human resources, accounting, supplies-purchase and marketing research. There is also a degree of decentralization to individual outlets and warehouses globally where the managers make decisions that touch on their day-to-day operations.

The organization has a President and CEO who is the overall head of the organization. Under the President are the Senior Vice President, Regional Vice President, and CEO’s of all other Walmart outlets. At the store-level we have the in-store managers led by General Manager who is deputized by the Assistant Manager and at times a Co-Manager is appointed in large stores.

The in-store hourly workers’ section is overseen by support manager who has Customer service and Merchandise supervisors (Thompson & Martin, 2010). This chain of command is finalized by the cashiers, stockers, and Sales Associates. This structure ensures efficiency is enhanced through division of labor, quick procurement and effective decision-making process.

This enables cost leadership strategy to be easily implemented in all the globally distributed outlets (Thompson & Martin, 2010). The costs of management and planning process are brought down through a multidivisional organizational structure. The delocalized leadership allows internal competition and less manipulation in the handling of outlets thus enabling an increase in profit margin which translates to affordable prices to the end-customers. Organizational Culture

The core values of Walmart revolve around the provision of proper services to their customers, respect to everyone and the achievement of excellence. Customer’s welfare comes first in everything the firm does (Phillips, 2012). The rules and regulations of the company are defined in the company’s statement of ethics that’s provided mechanisms of punishing errant workers and approaching ethical issues that the company experiences in its operations. These rules allow the personnel and other stakeholders to communicate and relate in a respective manner.

The language used in Walmart does not denote any sense of seniority but rather a team of individuals in achieving the organization’s goals. Worker’s view Walmart as a place to build their careers rather than a job hence their productivity is rarely hindered. The company too, has flexible environment where customers can even walk in on Sunday, raise queries and criticism. The company has a ritual of giving out polo shirts to all employees with the company’s slogan “Save Money. Live Better” (Sims, 2002).

The employees also participate in a choir anthem that enables them to get psyched up for the tasks ahead. The employees regard each other as team players and always take time to celebrate each other’s milestone like birthdays and promotions. This organizational culture sets part Walmart from other organizations as a flexible, vibrant and welfare-oriented firm. The culture embodies the founder, Sam Walton, values in handling business operations and customers. SWOT Analysis

StrengthsWalmart has experienced greater global expansion that has made one of the largest employers in the US and a retail giant that has uplifted many suppliers. The global expansion has seen the retail-giant purchase the United Kingdom based retailer, ASDA. The large size of the organization enables it to fully enjoy the benefits of large economies of scale. Its greatest competence is the use of modern technology in its operations. It has a computerized system of inventory and supply distribution. It can easily see how its products are performing store-by-store at a glance.

Another major strength that this organization enjoys is the wide store and distribution system. It has a different form of outlets that provides a variety of products their different customers (Soderquist, 2005). A focused strategy is in place for Walmart Human Resource Management and development. The brand invests time and money in training its personnel. Weaknesses

It is perceived as a monopoly that is slowly shutting down small-scale business. This multinational organization is said to have destroyed local business environments by creating unemployment for people previously small-scale businesses. Walmart has also been accused of discriminating on employees such as the female workers and poor terms of service to their employees. This has generated bad publicity for the retail-giant with many crusaders of equality and labor rights finding fault in its human resource policies.

Walmart being the world’s largest grocery retailer and control of its outlets, despite IT advantages could leave it disadvantaged in some regions due to a great span of control. The geographical differences might at times pose a great to the larger management due to the weakened grip on the management of affairs of the global outlets.

The next are that points out this brand’s weakness is the fact that Walmart sells products across many sectors (such as stationery, clothing or food). It makes it lack the flexibility of its more focused competitor brands. Another weakness is anchored on the fact that the brand has a low presence in relatively few countries worldwide despite being global. This makes the corporation miss out in many diverse markets that are found in different countries. Opportunities

ValueThe organization has the capability of improving its products through differentiation and robust marketing techniques. The value can also be enhanced by use of emerging technologies or constant evaluation of suppliers in order to identify the most cost-effective and valuable products in the market. Rarity

The Company can invest and gain more from its unique store design, business strategy, superior products supply chain management and point-of-sale data system. The uniqueness is key in ensuring that the brand is set apart from its competitors and easily identifiable. Threats

Emerging competitionRetail business has seen the rise of many organizations that are set to disrupt the assumed monopoly power that Walmart wields in some countries such as the United States. The emerging competition is also incorporating technology that Walmart brand enjoyed alone. The competition is also embracing new business models that are aimed at positioning them at a vantage position in the different global markets. Unpredictable Global Economic Crisis

The economic downturn has forced many individuals to adjust their spending patterns. Many employees are embracing strict spending habits that only touch on the essential goods and services. It has also led to the clamor bymany employees for high wages in accordance with the rising inflation rates.

The competition also is emerging because of the low costs of manufacturing that are fostered by outsourcing. Outsourcing occurs in countries that have lower costs of human resource and manufacturing of products. This has lead to price competition resulting in some ranges. Recommendations Based On SWOT Analysis

Walmart should ensure that it incorporates more innovative ways of operating-cost reduction to enable it maintain its objective of being a cost-effective firm. It should seek regular technological advancements in order to reduce the costs incurred in the logistics, procurement of supplies, sales and communication.

The organization should also increase the number of mergers with small scale-firms in order to reduce the perceived destruction of local business environments. Mergers are essential in cushioning the brand for global economic downturns in regions where the brand has suffered due to the national economic policies or adverse economic phenomena such as inflation. It should also trim its workforce and close down outlets that it deems as poor performing. This will be essential in cushioning it from global economic downturns.

References

Daft, R. L. (2010). Organization theory and design. Mason, Ohio: South-Western Cengage Learning.

Fishman, C. (2006). The Wal-Mart effect: How the world’s most powerful company really works– and how it’s transforming the American economy. New York: Penguin Press.

Flamholtz, E., & Randle, Y. (2011). Corporate culture: The ultimate strategic asset. Stanford, Calif: Stanford Business Books.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Competitiveness & globalization. Mason, OH: South-Western Cengage Learning.

Phillips, J., & Gully, S. M. (2012). Organizational behavior: Tools for success. Mason, OH: South-Western Cengage Learning.

Quelch, J. A., & Deshpande, R. (2004). The global market: Developing a strategy to manage across borders. San Francisco, CA: Jossey-Bass.

Schermerhorn, J. R. (2011). Introduction to management. Hoboken, N.J: Wiley.

Sims, R. R. (2002). Managing organizational behavior. Westport, CT: Quorum Books.

Soderquist, D. (2005). The Wal-Mart way: The inside story of the success of the world’s largest company. Nashville: T. Nelson.

Thompson, J. L., & Martin, F. (2010). Strategic management: Awareness & change. Andover: South-Western Cengage Learning.