The High Cost of Low Wages - Assignment Example

WALMART & APOS; IMPLEMENTATION, STRATEGIC CONTROLS AND CONTINGENCY PLANS Objectives Until the year 2006 Wall mart was leading retailers in America. Everything was going smoothly for the company. However in 2006, the stock of the company started witnessing fall in prices and its sales volume too started declining (Barbaro, 2006). The company had to take a change management strategy to turn things around. The company directors had tried to stop the trend and revive the stocks of the company through share repurchase declaring greater dividends but nothing seemed to woo the investors to purchase stocks and would result in the growth of the stocks. One of the main issues that had become the root of all problems was its core values of providing low prices always. Some of the strategies that the company had implemented into achieving these policies were called into question. One of the important objectives of implementing the strategy for change management was to revive the falling sales and get the company back on growth platform. Functional tactics One of the turnaround factors for wall mart that is going to lift it out of the stage that it is currently in is to grow leaders at all stage. To grow leaders at all stage of the organizations among both the managerial and non managerial workforce is to impart them adequate training. Since wall mart is a large multinational organization so to impart training at large scale will require adequate planning. The plan to grow leaders at all stage of the organization should be done step by step (Walmart Inc, 2006b). The plan should be first inducted as a training module for a single branch and then slowly spread into other branches at first in a country, then in a continent and then through all the continents. Before going into next step of the process the company must first ensure that the first step has been successful with clear and positive results. The company by utilizing its innovative CRM tools has huge pile of customer data that it has collected over the years. A simple strategy would be look into what has changed in the customers buying behavior. If the customers are moving towards other store why on earth are they doing so? The key is to analyze the key lacunas and fix them. One of the key areas where wall mart might be lacking as compared to its competitors is that in a drive to give its customers “Always low prices. Always” the company gives discriminatory wages to its employees. So the company suffers from low employee productivity as compared to many of its competitors (Cascio, 2006b). Costco produced $21,805 in operating profit per hourly employee. This is compared to $11,615 at Sam’s Club (Cascio, 2006a). The wall mart should invest more in their employees to achieve high sales and profitability growth as and to bounce back. The company should for its growth and change management strategy should invest in the core areas so that the company grows and is able to maintain its sales growth. The other areas where the company can achieve growth to grow the sales level is by growing in adjacent categories and growing by sub segmenting customers. Action items Key Success Factors for Implementation The key success factors for any of the strategic plan to implement successfully are that the plan for the strategic should be communicated throughout the organization. For the strategic plan to be implemented successfully or for that matter any organization plan to be implemented successfully the employees of the organization should be taken into the process and made a part of the process. The employees are the key success factors for any organization plan to work successfully. Another area that must be looked into is the fact that the strategic plan is achievable and practical. Including employees in the change management plan helps the management to take feedback of the employees regarding change management. Another important thing is that the employees should be talked to about the impending change process that the company is thinking about. Another area that should be looked after and which will provide to be a key success factor for the plan is that the employees should be trained to assume leadership roles. The employees should be the bearers of change. Any change that the company undertakes is for better sales. Better sales come from better customer relations. Any change management process is incomplete without the customers knowing and approving the change. Therefore, the change should be communicated not only to the employees but to the customers too. Milestones and a deadline Months 1 2 3 4 5 6 7 8 9 10 11 12 Activity                         1. Providing training and development                         a. within a single store                         Implementation                         Review                         Changes if any                         b. Within a country                         Implementation                         Review                         Changes if any                         c. whole world                         Implementation                         Review                         Changes in any                         2. Investing in core areas for growth                         a. within a single store                         Implementation                         Review                         Changes if any                         b. Within a country                         Implementation                         Review                         Changes if any                         c. whole world                         Implementation                         Review                         Changes in any                         3. Using CRM                         a. within a single store                         Implementation                         Review                         Changes if any                         b. Within a country                         Implementation                         Review                         Changes if any                         c. whole world                         Implementation                         Review                         Changes in any                         4. Contingency plan, if needed                         Tasks and task ownership The tasks in this change management plan are 1. Providing training and development to make the next generation of leader, 2. Invest in core areas of growth 3. Using of CRM. For providing for tasks that facilitate change management process at wall mart different groups of stakeholders should be involved. For example in order to provide for the training and development of the managerial and non managerial staffs at wall mart the HR department should be involved. It is the function of the HR manager to provide for the training and development of the employees so that the employees assume leadership role. Another task is to invest in core areas of growth. This area of the task requires the assistance of the store manager to identify core areas of business and to identify areas where growth can take place. Resource allocation Budget and Forecasted Financials Budget (Million USD) Activity Cost / activity Providing training and development 2552.985 2. Investing in core areas for growth 4254.975 3. Using CRM 850.995 Total cost 8509.95 The total budget allocation for the operating expenses is expected to be about 15% of the total operating expenses of the firm in the year 2006 (Wallmart Inc, 2006a). Out of the total budget that had been allocated for the change management process maximum would be used in the investing in the core areas of growth. The next area of investment would be in the training and development of the employees to develop and them for future leadership role within the organization. The total investment for the core areas for growth is estimated at 50% of the budget and total investment for the training and development is estimated at 40% of the total budgeted expense. Rest of the investment that is 10% of the budget is made in using CRM. Break-even chart Break even analysis Expected Annual net Contribution to net profit of the company for the change management (million USD) 2807 Break even (Year) 3.03168864 It is estimated that by implementing the strategic changes to the company the annual; net contribution to the profit margin would be 2807 million USD. The expected break even is thought to be arrived or reached at by about 3 years. After three years the company should be able to make a turn around and make a transition towards profitability. As the company is thought to go on operating for eternity and the project does not have a definite lifetime so the benefits to be accrued from the project will likely last for a long time and so the estimated change management process is likely to be very successful for the company. Risk Management Plan For any change in management process, there exist certain risk factors that must be taken care of. In case of this change management process the challenges and risks that exist are regarding the non acceptability of the change management process by the stakeholders involved within the company. For example the various stakeholders that are involved with the company that is the employees’ internal management and most importantly the customers may not be motivated or may not be ready to accept the changes. If such a thing happens then the total change management drive would be a failure. Contingency Plans for Identified Risks In lieu of the above stated risk it is necessary that a contingency or back plan is made if in case the change management drives fails. The best way to judge whether the change management is working or not, is to apply it first to a store. As the financial implication and the cost of failure of applying it to a store is much smaller as compared to the world wide perspective so the model should first be applied to a store and judged for success or failure. If the model fails in one store then changes can be made and then applied to other stores. For the model to work all the employees and customers should be communicated about the plan at the first place to ensure that they accept the change management. Reference Cascio, W. F. (2006a). The High Cost of Low Wages. Retrieved from: https://hbr.org/2006/12/the-high-cost-of-low-wages Wallmart Inc. (2006a). Annual Report. Retrieved from: http://c46b2bcc0db5865f5a76-91c2ff8eba65983a1c33d367b8503d02.r78.cf2.rackcdn.com/7a/59/95effe0b4d869efd132d8bac222e/2006-annual-report-for-walmart-stores-inc_130202970623985117.pdf Cascio, W. F. (2006b). Decency Means More than “Always Low Prices”: A Comparison of Costco to Wal-Mart’s Sam’s Club. Retrieved from: http://www.ou.edu/russell/UGcomp/Cascio.pdf Walmart Inc. (2006b). Walmart and Workers. Retrieved from: http://makingchangeatwalmart.org/walmart-and-workers/ Barbaro, M. (2006). Wal-Mart Trips as It Changes a Bit Too Fast. Retrieved from: http://www.nytimes.com/2006/11/30/business/30walmart.html?pagewanted=print&_r=0 Read More