Organizational Change at Wal-Mart - Case Study Example

Running head: Organizational Change at Wal-Mart Organizational Change at Wal-Mart Introduction Wal-Mart has been the most effective supply chain system in the world. Wal-Mart’s core operational activity includes controlling its inventory and supply chain system. Regarded as an epitome of cutting-edge thinkers in retail technology, Wal-Mart is currently the dominant discount chain. Wal-Mart’s IT has greatly influenced retail discount chain and supply chain, data processing, and B2B communications. Nonetheless, Wal-Mart seems to be losing market dominance to new players in retail discount chain. Furthermore, labor unions, its own associates, religious groups, and grassroots organizations have criticized Wal-Mart. Such accusations have considerably affected Wal-Mart’s reputation and consequently the company’s bottom line. Wal-Mart had developed a complex system of distribution, which enables customer’s accessibility to stock items. Wal-Mart’s uses scanners at checkout stations to identify and monitor the sale of each item. This also enables Wal-Mart to monitor its supply chain. Wal-Mart is currently seeking to improve its infrastructure to increase the effectiveness of its supply chain management. It also intends to replace bar codes and security tags with Radio frequency identification (RFID) microchip transponders. The elimination of the need for price checks would improve customer satisfaction and lower costs. This paper will discuss systemic nature of Wal-Mart and the changes the company has taken to improve its effectiveness, processes, and employee productivity. Wal-Mart’s systemic nature Stalk, Evans and Shulman (1992) observed that Sam Walton, the founder of Wal-Mart imparted the culture of service excellence among Wal-Mart’s employees. Employees are motivated to welcome customers at the entrance. Employees are also permitted to have own shares of the organization. Wal-Mart low-price strategy has enabled the company to strike better deals with core shoppers. This has helped save on the merchandizing and advertising expenses. Wal-Mart gigantic stores provide economies of scale and broader alternatives of merchandising. This underscores Wal-Mart relentless efforts at achieving customer satisfaction. Wal-Mart’s use of machines in decoding encoded information enables its efficiency in supply chain management. The rectangular universal code for goods is a scanning system used by Wal-Mart. Packaged products at Wal-Mart are labeled with bar codes. The checkout stations of sales tend to ring up sales and track inventory deductions simultaneously. All Wal-Mart’s global stores are linked to headquarters through a huge satellite system that facilitates IT department’s centralization of Wal-Mart’s real-time inventory of data. The satellite technology enables Wal-Mart to feed daily inventory data into its distribution systems. Wailgum (2007) observed that Wal-Mart’s early adoption of bar code scanning and satellite technologies influenced the need for storage of data by corporations and motivated the retail corporations to embrace the electronic data interchange (EDI) for inventory records. Wal-Mart utilizes the Retail Link Web site to share information with its purveyors. The growth in Wal-Mart’s business may be attributable to the sharing of sales and inventory databases with its suppliers. Wal-Mart’s Collaborative planning, forecasting, and replenishment (CPFR) program minimizes loading costs for both Wal-Mart’s retailers and purveyors (Johnson, 2002). Johnson (2002) observed that Wal-Mart’s low-price regime among its retailers is maintained by its efficient supply chain system. The company’s product price is 5 to 10 % lower than that of its competitors. Wal-Mart considers implementing wireless technology in its stores. Tests are currently done on the new technology of RFID smart-tag systems, which aim at replacing bar codes. Wal-Mart’s strategy is to enhance collaboration between retailers and suppliers. The RFID smart transponders would be put on percentage of products shipped by Wal-Mart’s suppliers to its distribution centers. This ambitious program aims at reorganizing the pipeline between Wal-Mart and its suppliers in mitigate out-of -stock problems. The advantage of RFID tags over bar codes is that RFID tags can be tracked without necessarily being visible. The cross-docking system enables products to be delivered continuously to Wal-Mart warehouses in which the products are identified, repackaged, and transported to stores. The RFID-tagged stocks would be monitored with remarkable visibility while being delivered into warehouses and store-shelf inventories. Nonetheless, the RFID has had its fair of technological shortcomings since it was implemented in 2003. There was no accountability on return on investment (ROI), and it proved to be costly to purveyors, many of whom lack knowledge of RFID and its implementation. The difficulty associated with RFID implementation by suppliers and insufficiency of workforce with necessary RFID knowledge has made the suppliers achieve little in meeting Wal-Mart’s benchmarks, with ability to preserve Wal-Mart business being their only ROI. Consequently, Wal-Mart has achieved little out of its expectations. Out of Wal-Mart’s 20,000 purveyors, only 600 have implemented the RFID (Wailgum, 2007). Problems with Wal-Mart’s operation strategies Wailgum (2007) observed that in spite of Wal-Mart’s high technology benchmarks and efficient IT-oriented supply chain, the retail company has to grapple with problems engendered by its IT system. In 2006 for instance, the Bentonville-based retail corporation incurred huge losses in its South Korean and German stores. This may be attributable to problems with adaption to local cultures and stiff competition from established players. In the US, Wal-Mart curtailed the number of new supercenters it had planned to open in 2007. The company experienced a profit decline in 2007. The Wal-Mart management attributed this problem to the impacts of high costs of energy on it mainstream shoppers and difficulties in shifting to fresh lines of upscale clothing and home décor business at its stores. This implies that there is likelihood that its core shoppers would not buy high-end apparels and home décor products online (Johnson, 2002). Empirical evidence indicates that Wal-Mart’s woes is due to overlooking customer service in US, errors in merchandising, and lack of sensitivity to local foreign markets. The Amazon.com and the Target websites offer stiff competition to Wal-Mart’s Retail Link website. According to the 2007 Internet Retailer survey, Wal-Mart.com ranked number 13 in terms of volumes of Web sales among retail corporations. However, Alexa, a Web data analysis organization, ranked it third most popular website in terms of the numbers of users. Wal-Mart has been experimenting on the social networking technologies although the outcomes are mixed. The RFID smart tag system has suffered heavy setbacks in its entire supply chain system. In responding to this, Wal-Mart intends to concentrate on improvement of the inventory system, deliverance of quality products at low prices, and execution of store operations at the highest benchmarks. Wal-Mart is currently facing a dilemma between zealously enforcing Walton’s low price strategy through IT based centralized decisions from Bentonville and increasing its retailer’s sheer size in new global markets. The fact that competitors such as Tesco and Target are achieving the level of sophistication of Wal-Mart’s retail technology, threatens Wal-Mart’s maintenance of market dominance. Wal-Mart’s 45 years of growth was attributable to its organizational culture based on command-and-control approach to decision-making coupled cutting-edge technology. However, this strategy may not help Wal-Mart maintain its market dominance (Wailgum, 2007). Organizational changes at Wal-Mart and impacts on stakeholders involved Gereffi and Christian (2009) observed that Wal-Mart has embarked on changing its business approach with emphasis on new social and environmental benchmarks that may mold its core operation strategies. Wal-Mart is conducting a well-publicized campaign to reshape its business model. Wal-Mart is now focusing on setting example for other businesses in terms of practices that are more ethical with regard to labor relations, integration with suppliers, and the environment. Wal-Mart considers instituting recycling in its business model. Lai, Cheng, and Tang (2010) observed that Wal-Mart has instituted the green retailing. Wal-Mart aims at reducing wasteful packaging of its toy products with a projection that it would save approximately 3800 trees and 1000 oil barrels, which would save the economy around $ 2 million. Wal-Mart has embarked on acquiring hybrid trucks powered by diesel and electricity, and refrigerated trucks that have small cooling power units, so that the truck engine is automatically switched off when the truck stops. Wal-Mart has instituted the Jobs and Opportunity Zone program that aims at assisting small retail stores abroad. Wal-Mart has repeatedly underscored their Ethical Standards Program, in which 8,873 companies were audited in 2006. Wal-Mart has also embarked on making healthcare more accessible and affordable to its associates and customers (Gereffi & Christian, 2009). Wal-Mart considers developing different labor strategies and business models according to the market, culture, and institutions of its stores abroad. Zhu, Singh, and Manuszak (2009) observed that Wal-Mart prefer to penetrate markets in which the retail wages are lower and more households having vehicles and children rather than market incomes. The retail company prefers to operate in markets where there is little competition. Empirical evidence shows variations in Wal-Mart’s employment practices. Wal-Mart has played a major role in shaping the reproletarianization since the onset of factory revolution. Reproletarianization has considerable sociological impacts. Wal-Mart’s reproletarianism has influenced the engenderment of a great pool of low-skill service jobs globally. Wal-Mart’s power is in its ability to mold labor relations beyond the scope of the organization’s retail empire. Wal-Mart’s indirect employees at the international supply chain and staff of its competitors feel the effects of Wal-Mart’s power on their relationship with their direct employers (Johansson, 2005). Wal-Mart’s employees throughout the world are not unionized. Wal-Mart’s indirect influence on employees is evident in the logistics industry. Wal-Mart’s threat to gain Southern California’s market for instance, compelled supermarkets to lower costs, which hindered bargaining between unions and supermarkets. Wal-Mart’s international associates or employees are not unionized although the type and level of unionization tend to vary. Chinese associates are unionized. Mexico’s unions are not visible while in Brazil the unions are leftist and military-based. Wal-Mart’s antiunion stance in North America is still very strong. It has employed mechanisms to regulate labor costs for its direct associates, such as use of part-time and unconventional labor through having workers work off time or through breaks. Wal-Mart has been fighting labor unions, and instill workplace climate of fear and advocating for wage disparities (Gereffi & Christian, 2009). Johansson (2005) observed that Wal-Mart has initiated a widespread public relations campaign in its response to being in the media for wrong reasons. Wal-Mart had been accused of mistreating its associates. Wal-Mart brought in the HP and Oracle retail applications and contracted a Bazaar voice, a local social network, clandestinely. According to GSD & M Advertising, Wal-Mart needs to utilize online strategies for marketing including blogging in order to underpin the morals of its brands as well as promoting its new goods such the high-end apparels and home décor products. In 2006, Wal-Mart took GSD & M‘s advice. The retail company revived its web site and brought in new features including the ability to appraise and rate products by online shoppers. Wal-Mart has been engaging Bazaar voice in order to support community among its shoppers. Wailgum (2007) observed that Wal-Mart has been effecting change. The Wal-Mart’s Facebook Roommate Style Match group targeted college students. The organization expects college students to chat and purchase back to school products through Facebook and Wal-Mart.com. Wal-Mart’s had launched the Site to Store, an online service that is currently doing very well. The service permits online shoppers to order products from Walmart.com and having the ordered goods shipped to nearest Wal-Mart store free. This includes shipment of goods that are not available in Wal-Mart’s stores (ORourke, 2007). Recommended action steps Wal-Mart should continue with its merchandising strategy of adopting the best breed of retail technologies in areas of business that can quickly materialize. IT-based merchandisers and purchasers can utilize Wal-Mart’s huge database in order to improve decision-making. Retailers can collect the information available on the Retail Link in order to promote intelligent merchandising. Due to retailer’s preference for local systems, Wal-Mart can make use of local vendors in running their packaged products. The 2007 implementation of Oracle’s optimization software for retail pricing and HP’s Neo-view data platform for warehousing would minimize the risk of information divulgence of its respective partnerships by vendors (Wailgum, 2007). The Oracle tool would be more important in Wal-Mart’s growth strategy especially in the high-end apparel business in which products tend to have shorter spans. Optimization of price would be more useful in facilitating Wal-Mart decoding of appropriate time to mark down clothing that have low sales. The price optimization software is important in decision-making by Wal-Mart on when to mark down apparels that experience low sales. The BI data useful for stocking of Wal-Mart stores based on what sells on the local market, could be provided by the HP’s Neo-view tool. Wal-Mart would need to change its dependence on local IT systems and the conviction that they are much more superior. Wal-Mart would need to consider the best of cross-commercial applications such as the business intelligence(BI) and price-maximization tools so that it is able to effectively compete with new players such as Tesco, JCPenney and Target (Wailgum, 2007). Wal-Mart would need to address the problems associated with its practices such as curt cashiers, inadequately stocked shelves, and messy stores. Even though IT may not address such issues, it can enable Wal-Mart to update its POS systems regularly, full-time running of price checkers and interactive kiosks, expediting the checkout experiences, and ensuring the readiness, willingness, and ability of associates to guide and encourage shoppers to utilize all the in-store customer service tools. Wailgum (2007) observed that Wal-Mart require decentralized decision-making to effectively manage its global corporations. The organization would have to implement a networked system that facilities the dissemination of decision making from its Bentonville, Ark., headquarters to local store managers. Wal-Mart being a MNC has its operations subject to global disruptions. It would need to strike a proper balance between local flexibility, abroad and centralization. Local decision making by local managers enhances their ability to respond to brand selling and efficient integration of local suppliers. This would give store managers the ability to regularly shift product mix in particular stores and neighborhood classes to indicate the specific interests of each location. Wal-Mart’s failure at South Korea and Germany may be attributable to insistence to adopt their benchmarks, which European countries are reluctant to do because of their preference of industry benchmarks and mutual interfaces that are applicable to different models of business processes. Wal-Mart should be sincere in implementing the changes. This is because it has been criticized for making changes for the purpose of public relations. The healthcare plan has been viewed as goodwill gesture. A recently leaked internal memo revealed Wal-Mart’s suggestions to cut-down on health care expenses through discrimination in hiring older people and applicants who seem unhealthy. Wal-Mart has been criticized for self-administration of their own ethical benchmarks. Wal-Mart’s green retailing initiative should cover broader environmental concerns according to big-box format of retailing (Gereffi & Christian, 2009; Wailgum, 2007). Conclusion In summary, Wal-Mart has been the dominant retail discount chain. Its introduction of cutting-edge technology has shaped the retail industry and supply chain management. The entrance of new uprising superstars such as Tesco and Target makes it difficult for Wal-Mart to maintain its market dominance. The RFID smart tag technology for supply chain management did not perform well as expected. Wal-Mart has been on the media for wrong reasons. Labor unions, its own associates, religious groups, and grassroots organizations have criticized it. Such accusations have considerably affected Wal-Mart’s reputation and consequently the company’s bottom line. Wal-Mart has embarked on conducting an extensive media campaign to revive its tarnished reputation. References Gereffi, G., & Christian, M. (2009). The Impacts ofWal-Mart:The Rise and Consequences of the World’s Dominant Retailer. Annual Review of Sociology , 35, 573-591. Johansson, E. (2005). Wal-Mart:Rolling Back Workers Wages,Rights,and the American Dream An American Rights at Work Report. USA: American Rights at Work. Johnson, A. H. (2002, September 30). A New Supply Chain Forged. Computerworld , 36 (40), pp. 38-40. Lai, K.-h., Cheng, & Tang, A. K. (2010). Green Retailing:Factors for Success. California Management Review , 52 (2), 6-31. ORourke, J. S. (2007). The business communication casebook : a Notre Dame collection. Mason: Thomson South-Western. Stalk, G., Evans, P., & Shulman, L. E. (1992). Competing on Capabilities:The New Rules of Corporate Strategy. Harvard Business Review , 57-68. Wailgum, T. (2007, January 11). How Wal-Mart Lost Its IT Mojo. Cover Story , 21 (3), pp. 45-56. Zhu, T., Singh, V., & Manuszak, M. D. (2009). Market Structure and Competition in the Retail Discount Industry. Journal of Marketing Research , 46 (4), 453-466. Read More