Business Processes in Wal-Mart - Essay Example

? Business Processes Table of Contents 0 Wal-Mart 4 1 Aims of Wal-Mart 5 1 Mission ment 5 1.2 Vision ment 5 2 Size of Wal-Mart 6 1.3 Operating Structure of Wal-Mart 6 1.4 Success Criterion for Wal-Mart 6 1.4.1 Cost Advantage 7 1.4.2 Pricing 7 1.4.3 Value Chain 7 2.0 PEST Analysis 8 2.1 Political 8 2.2 Economic 8 2.3 Social 8 2.4 Technological 9 Reference 10 1.0 Wal-Mart Wal-Mart has been selected for the study and next part of the report will analyze various organizational aspects of Wal-Mart. Wal-Mart Store, Inc. is a multinational company which was founded in the year 1945 and is headquartered at Bentonville Arkansas, United States (Yahoo Finance, n.d.). It is a publicly listed company and its shares are traded in the New York Stock Exchange (NYSE) with the ticker symbol “WMT”. The company’s stocks were first traded at NYSE on August 25, 1972 (Wal-Mart, 2012a). Wall-Mart is engaged in the business of operating retail stores of various formats in different parts of the world. Wal-Mart operates restaurants, retail stores, supermarkets, discount stores, hypermarkets, supercenters, apparel stores, warehouse clubs, etc. The products offered in the stores of Wal-Mart includes frozen foods, meat, dairy products, bakery products, baby products, beverages, grocery items, electronic goods, household items and so on. At present the business operations of Wal-Mart is divided into three broad segments. They are: a) the Wal-Mart International segment, b) the Wal-Mart US segment, and c) the Sam's Club segment. Of these three the US segment is the largest of all. Retail stores of various formats are operated by Wal-Mart in all the 50 states of US. Along with this it also operates its retail operations online through walmart.com. The international segment of Wal-Mart has its presence in 26 countries of the world and is also in the business of operating its retail operations in all those countries outside US. The Sam's Club segment of Wal-Mart includes membership based warehouse clubs that are operated in 47 states of US along with Puerto Rico (Wal-Mart, 2012b). The US business segment of Wal-Mart operates its business activities which are divided into six strategic merchandise units. They are: a) Grocery, b) Entertainment, c) Hardliners, d) Health and wellness, e) Apparel, and f) Home. All these six merchandise units offer different categories of merchandise products through its various types of retail stores located in different parts of US. In the recently published Fortune-500 list Wal-Mart has been ranked second, just behind Exxon Mobil (Wal-Mart, 2012). 1.1 Aims of Wal-Mart Aims of the company can be understood by analyzing the mission and vision statement of the company. 1.1.1 Mission Statement The company tries to provide quality products at an EDLP or everyday low price complemented with comprehensive Customer service. The company tries to offer services and product improving everyday life of customers. The company has modified mission statement in recent years in order to preserve its significance. In accordance to new mission statement the company will provide merchandises to customers in 24 *7 manners. The company emphasizes on their talented human resource pool and treat them as asset for the company. The company also donates thousands of dollars for betterment of unprivileged population of the society. 1.1.2 Vision Statement Even today’s hypercompetitive business environment Wal-Mart follows traditional vision statement established by Sam Walton (1918-1992). Sam Walton taught them to think from customer’s viewpoint and deliver merchandises complemented with lowest possible prices, superior quality, guaranteed satisfaction, friendly and knowledgeable sales service, free parking, convenient shopping hour and great shopping experience. 1.2 Size of Wal-Mart Size of Wal-Mart can be understood by analyzing their distribution Channel. Wal-Mart operates business in retail chain format hence size should be analyzed in terms of how many stores they have established in USA and other countries. Wal-Mart has various divisions like USA, International and Sam’s Club. Size of Wal-Mart can be described in the following manner. Total Retail Units 10,390 Wal-Mart USA 3,925 Sam's Club 615 Wal-Mart International 5,850 Associates USA 1.4 million Associates Rest of the World 0.8 million (Source: Wal-Mart, 2012) 1.3 Operating Structure of Wal-Mart Wal-Mart has divided their business operation into three product divisional arrangement and they are Sam's Club (USA), Wal-Mart Stores (USA) and Wal-Mart International stores. International operation of the company contributes twenty percent of their annual revenue. The company has established Sam's Club in more than thirteen countries (Ball et al., 2005, p. 390). Each of the divisions is working freely and they set their business objective in accordance to demand of local market (George & Jones, 2005, p. 513). 1.4 Success Criterion for Wal-Mart From an outsider’s viewpoint retail industry seems to be hyper competitive and low margin provider. Many researchers have pointed out that earning sustainable profitability is a challenging task for retailers. Many retailers are trying to decrease value chain steps in order to achieve cost benefits while others are leveraging e-business model to decrease service delivery cost. 1.4.1 Cost Advantage Operating expense for the company is 33% cheaper with respect to their competitors. Goldman Sachs has pointed out that Wal-Mart has advantage of COGS or cost of goods sold with respect to their competitors. The company follows Cost Orientation (reducing cost in every possible occasion) to achieve cost advantage. Wal-Mart sells large volume of product in minimum profit margin to earn revenue. Maintaining lower margin helps them to sell products at every day low price (EDLP). 1.4.2 Pricing Wal-Mart follows sells product at every day low price while their selling price is at least 10% lower than competitors. The company has adopted geographical pricing model to differentiate prices in accordance to demand of customers of particular location. This strategy helped them to fight against local retailers and earn sustainable competitive advantage. The company uses web 2.0 technologies to increase brand presence through social media network. Implementing vendor management software helped the company to decrease supply chain cost. 1.4.3 Value Chain The company has radically changed hub and spoke distribution channel with the help of superior inventory administration and logistic service. The company maintains value chain with 0.1 million trustworthy suppliers. The company implemented private satellite communication system to increase efficiency of value chain. Radio Frequency Identification (RFID) technology helps them to identify and coordinate various elements like logistics, distribution, warehouse activity and sales of value chain. The whole process not only decreases cost for Wal-Mart also helps them to increase product quality (Kneer, 2009, pp. 6-7). 2.0 PEST Analysis 2.1 Political Wal-Mart has donated merchandises worth of $20 million to people devastated by Hurricane in the year 2011. They have reached to people with their supply truck even before FEMA after the Hurricane thrashed houses. Wal-Mart is the best retailer in USA and contributes significantly to GDP of the country. Government of the country provides free trade zone to Wal-Mart in order to support their business initiatives. 2.2 Economic Wal-Mart has contributed more than $2 billion to the country in terms of financial incentives, bonuses and profit sharing. Total sales volume of the company has crossed $405 billion mark in the year 2010. The company is showing sales growth of 11 % over the last few years. 2.3 Social Target customer for Wal-Mart is generally low income group people (Pahl, and Richter, 2009, p. 22). Company has established t headquarter in a location covered with warehouses and houses with minimum decoration. The company tries to create homogenise market by aligning small towns with big cities in their sales network. Frugal customers prefer Wal-Mart as favourite shopping destination due low price product offered by the company. 2.4 Technological The company has implemented state of art IT technology in order to decrease operational cost. The company uses Radio Frequency Identification (RFID) technology and ERP system in order enable automation in their value chain network (Ferrell, and Hartline, 2010, p. 279). Procurement process for the company is also complemented with state of art technology (Miller, 2009, P. 33). Web 2.0 technology not only helped them to increase digital presence but increased brand equity among web users (Simon, 2010, p. 291). Reference Ball, D., McCulloch Jr, W., Geringer, J., Minor, M. and McNett, J., 2005. International Business: The Challenge of Global Competition. 11th ed. New York City: McGraw-Hill. Ferrell, O. C. and Hartline, M., 2010. Marketing Strategy. Stamford, Connecticut: Cengage Learning. George, J. and Jones, G., 2005. Understanding and managing organizational behavior. 4th ed. Upper Saddle River, NJ: Pearson Prentice Hall. Kneer, C., 2009. The Wal-Mart Success Story. Munich: GRIN Verlag. Miller, M., 2009. A Seat at the Table: How Top Salespeople Connect and Drive Decisions at the Executive Level. Austin: Greenleaf Book Group. Pahl, N. and Richter, A., 2009. SWOT Analysis - Idea, Methodology and a Practical Approach. Munich: GRIN Verlag. Simon, P., 2010. The Next Wave of Technologies: Opportunities from Chaos. Hoboken, New Jersey: John Wiley & Sons. Walmart., 2012. Our story. [online] Available at: [Accessed 10 October 2012]. Walmart., 2012. Where in the World is Walmart? [online] Available at: [Accessed 10 October 2012]. Yahoo Finance., No Date. Wal-mart stores inc. 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