The Wal-Mart Effect - Dissertation Example

The Wal-Mart Effect Introduction I will be necessary to consider different aspects of an organization. The different aspects will generally require different techniques. This exercise looks at four techniques. First there will be the SWOT technique. This is generally considered the core of analysis in strategic management. Then there will be the cost price relationship. The third one is the four Cs. . The fourth is the concept of the stakeholder. The second and third ones are relevant because the business serves the consumer market. This approach looks at the special dynamics of the consumer market. The third one is almost as relevant as the first. The reason is the size of this corporation. We are not considering its international operations here. It must be recognized that it in many ways can be seen as an NGO. That is a non governmental organization. Such organizations are seen to have very strong influence in the society. And the influence goes beyond just earning a profit in the market place. SWOT – Strengths weaknesses opportunities and threats. There are internal factors and there are external factors. Business strategy is the focus of improving the competitive position of the organization. This is viewed within the context of the particular industry. Strategies can be competitive or cooperative. The decision has to be mad how to compete. In other words which approach will be used. Competitive strategies seek to out perform the competition. Once the decision is made the decision has to be made as to the basis to be used. Would it be on price or some other measures. The level of competitive intensity in an industry is determined by. This is the attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An unattractive industry is one where the combination of forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition WT minimize weaknesses and avoid threats – defensive. The weakness here is that of employee relations. There is a paradox. The company has no difficulty in acquiring appropriate staff at all levels. At the same time the company is criticized in the society for not being a good employer. The company will have to be able to successfully deal with the labor union environment. It would be necessary to deal with it fairly. The threat would be possible punitive government regulation. There is the need to be vigilant. One way to do this is to follow the law. This means considering the constitution and any laws on the books. In addition it would be necessary to consider any proposed legislation. ST considers strengths to avoid threats. The company’s strength can be identified by its management skills. This management skill should be also considered its leadership skills (Goetz, Stephan J.; Rupasingha, Anil). The distinction is necessary. The reason is that management can be seen as the ability to accomplish the task efficiently. In the case of leadership, it is necessary to read the environment and know what the correct task is. In many cases this is described as having vision. WO use opportunities by overcoming weaknesses. This can be achieved by identifying more closely with the community. The company can achieve this by giving to charities. It would be necessary to also promote suitable existing charities. SWOT is one possible tool to be used in strategic management. It seeks to reduce the factors under consideration to four. Then it seeks to break them down into two broad categories. The two categories are internal and external. The internal factors are strengths and weaknesses. The external forces are opportunities and threats. The thought process is to consider the internal forces as being under the organizations control. And to consider the external forces as being outside of the organization’s control. This frame work makes it possible to have a mix of the letters. The objective is to increase strengths. To reduce the level of weakness or in other words become stronger in the weak areas. For the external factors the organization seeks to identify the opportunities. As the opportunities are identified the organization seeks to uses them to the best advantage possible. In the case of threats, the organization seeks to identify them. The organization then seeks to minimize the effects of the threat. The challenge is how to balance the management of the internal factors and the external factors. First there is the need to know of the factors the level of impact. This requires knowing the dynamics of the operational environment. Societal pressure can change a possible opportunity in to a threat or vice versa. An example would be low fuel prices. This could be an opportunity to increase profits. To another organization low fuel prices would be a threat. This is true of the organization earns high revenue from high fuel prices. In this context each organization is unique. It becomes a matter of skill to know what is relevant in any of the four areas of (SWOT) Cost price relationship The contribution margin represents the amount of income or profit the company made before deducting its fixed costs. Said another way, it is the amount of sales dollars available to cover (or contribute to) fixed costs. When calculated as a ratio, it is the percent of sales dollars available to cover fixed costs. Once fixed costs are covered, the next dollar of sales results in the company having income. It can be calculated using either the contribution margin in dollars or the contribution margin per unit. To calculate the contribution margin ratio, the contribution margin is divided by the sales or revenues amount Break-even Concepts. The break-even point represents the level of sales where net income equals zero. In other words, the point where sales revenue equals total variable costs plus total fixed costs, and contribution margin equals fixed costs. Break-even point can be in dollars or units. The break-even point in sales dollars is calculated by dividing total fixed costs of by the contribution margin ratio. Another way to calculate break-even sales dollars is to use the mathematical equation. Another calculation using the mathematical equation is the same as the break-even sales formula using the fixed costs and the contribution margin ratio discussed here. The break-even point in units is calculated by dividing fixed costs of by contribution margin per unit. The break-even point in units may also be calculated using the mathematical equation where “Y” equals break-even units. Again it should be noted that the last portion of the calculation using the mathematical equation is the same as the first calculation of break-even units that used the contribution margin per unit. Once the break-even point in units has been calculated, the break-even point in sales dollars may be calculated by multiplying the number of break-even units by the selling price per unit. If the break-even point in sales dollars is known, it can be divided by the selling price per unit to determine the break-even point in units. The four Cs The Four Ps is being replaced by the Four Cs model, consisting of consumer, cost, convenience, and communication. The Four Cs model is more consumer-oriented and fits better in the movement from mass marketing to niche marketing. The product part of the Four Ps model is replaced by consumer or consumer models, shifting the focus to satisfying the consumer. Wal-mart seeks that satisfaction by price sensitivity (Fishman, Charles). Pricing is replaced by cost, reflecting the reality that price is set by the market, not necessarily by the firm (if the price is too high, the firm will not sell enough and be forced to lower the price). Thus, the firm must focus on cost considerations rather than on what the correct price is to set. Place is replaced by the convenience function. Convenience takes into account the ease to buy a product, find a product, find information about a product, and several other considerations. Finally, the promotions feature is replaced by communication. Communications represents a broader focus than simply promotions. Communications can include advertising, public relations, personal selling, advertising, and any form of communication between the firm and the consumer. Broadly defined, optimizing the marketing mix is the primary responsibility of marketing. By offering the product with the right combination of the four Ps marketers can improve their results and marketing effectiveness. Making small changes in the marketing mix is typically considered to be a tactical change (George S. Day). Making large changes in any of the four Ps can be considered strategic. There can be large or slight changes in prices. Such changes are called strategic or tactical pricing. Of course the product is still the same. Pricing is closely linked to potentially relate promotional offer. The term marketing mix however, does not imply that the 4P elements represent options. They are not trade-offs but are fundamental marketing issues that always need to be addressed. They are the fundamental actions that marketing requires whether determined explicitly or by default (Sanchez Ron). Development in a societal environment can impact the corporation through its task environment. Wal-Mart has recognized this need. The environment is very sensitive to energy needs. Wal-Mart has recognized this. One object to this end is that the company seeks to have zero waste in a short period of time. The company seeks to produce it own energy as an additional step to wards energy consciousness. Financial data What ever an organization states in its financial statements is important. It is very good when the company also shows outside rating information. Here is the published outside information. Rating Agency Commercial Paper Long-Term Debt Standard & Poor’s A-1+ AA Moody’s Investors Service P-1 Aa2 Fitch Ratings F1+ AA DBRS Limited R-1(middle) AA Market Price of Common Stock This is a real measure of profitability. Fiscal year ended January 31, 2009 2008 High Low High Low 1st Quarter $59.04 $47.84 $50.42 $45.06 2nd Quarter 59.95 55.05 51.44 45.73 3rd Quarter 63.85 47.40 48.42 42.09 4th Quarter 59.23 46.92 51.30 42.50 This data is a direct extract from the published financial statements. Company information (Wal-Mart) The company is the leader in the retail business. It is the largest retail business in the industry. The company in its own published report says its strategy is working. The company dominates the market by using the price mechanism for dominance in the market place. This is achieved by, among other things economies of scale. Economies of scale Industry information Wal-Mart is a major leader in the retail industry. There are 100 Million customers visiting the stores. This means it is just under one third of the US population impacted. There are many layoffs in the US economy. An example being the auto industry and others. Wal-Mart has maintained worker levels and in many cases has been increasing hiring of workers at all levels. This includes part time as well as full time workers. Company and Industries In the USA the economy is considered to be in recession. This would mean declining sales declining revenue and declining profits. It is against this same back ground that Wal-Mart’s performance has to be regarded as outstanding. The company has been having growth in all these areas. The proof is when it is compared to other companies like AIG. This is a major insurer. The insurer is bankrupt and needed government’s help to stay solvent. Its Executives bonuses have been questioned. At the same time Wal-Mart’s bonuses are nearly ten times that paid by AIG. This has not even been noticed or considered a problem by the society. The health care industry has many parts. A major part is that of the pharmacy or dispensary. The health care industry is a major industry in the USA. There is evidence of the in the steady in crease in employment in this sector. The USA spends s sizable portion of its income on heath care. At the same time the country is seeing substantial increases in major diseases. Wal-Mart is using its resources to capture a segment of this market. CVS and Walgreen a major pharmacy chains. Wal-Mart is offering pharmacy services. This will result in customer loyalty and in some cases brand loyalty (Sobel, Russell S.; Dean, Andrea M). The approach is to have a loyalty to the employees. The company seeks to attract up and coming pharmacists. One way is to offer incentives at the training level. In addition the company seeks to put emphasis on generic drugs. Generic drugs are considered acceptable by the government for both Medicare and Medicaid. The company is already offering the drugs at a lower price than the competition. One reason is that the drugs are bought in bulk. This results in economies of scale. Wal-Mart Considers stakeholders People will be affected by an endeavor and can influence it but who are not directly involved the work. People who are (or might be) affected by any action taken by an organization or group. Examples are parents, children, customers, owners, employees, associates, partners, contractors, and suppliers, people that are related or located near by. We can only consider certain individuals. Those persons who can affect or who are affected by the achievement of an organization’s objectives. Then there is an ethical component (Freeman, R. Edward). The stakeholder is individual or group with an interest in a group's or an organization's success in delivering intended results and in maintaining the viability of the group or the organization's product and/or service. Stakeholders influence programs, products, and services. The thought is that any organization, government, entity, or individual that has a stake in or may be impacted by a given approach to environmental regulation, pollution prevention, energy conservation, etc. This means a participant in a community mobilization effort, representing a particular segment of society. Hospital board members, environmental organizations, elected officials, neighborhood advisory council members, and religious leaders are all local stakeholders. A tighter approach is to think of the stakeholder is more commonly used to mean a person or organization that has a legitimate interest in a project or entity. Many times a legitimate contract exists (Katherine E. Kenny). In discussing the decision-making process for institutions the concept has been broadened to include everyone with an interest (or "stake") in what the entity does. Wal-Mart has food stores in the building. This makes these other vendors and their customers stakeholders. This impacts small business owners and workers in the area. This includes even members of a community where its offices or factory may affect the local economy or environment. In this context, stakeholder includes not only the directors or trustees on its governing board (who are stakeholders in the traditional sense of the word). This considers the action reaction factors for all involved. Another example is the case of a property developer. He considers the refurbishment of some rented housing that is occupied while the work is being carried out, key stakeholders would be the residents, neighbors (for whom the work is a nuisance), and the tenancy management team and housing maintenance team employed by the landlord. Other stakeholders would be funders and the design and construction team. The decision to provide pharmacy service is significant. The fact that there is a commitment to pharmacy training is a key factor (AHIMA). There is value that can best be created by trying to maximize joint outcomes. For example, according to this thinking, programs that satisfy both employees' needs and stockholders' wants are doubly valuable because they address two necessary sets of stakeholders at the same time. There is even evidence that the combined effects of such a policy are not only additive but even developmental. For instance, by simultaneously addressing customer wishes in addition to employee and stockholder interests, both of the latter two groups also benefit from increased sales. This is relevant from the concept of contribution margin. The greatest value of a company is its image and brand. By attempting to fulfill the needs and wants of many different people ranging from the local population and customers to their own employees and owners, companies can prevent damage to their image and brand, prevent losing large amounts of sales and disgruntled customers, and prevent costly legal expenses. While the stakeholder view has an increased cost, many firms have decided that the concept improves their image, increases sales, reduces the risks of liability for management decisions, and makes them less likely to be targeted by outsiders. Conclusion The published financial information says a great deal. In addition the company provides outside data. The data of the stock value in the market is a good indicator. The organization adds the in formation of rating agencies. There is proof that the measure shows solid strategic management. Works Cited Katherine E. Kenny. Code or Contract: whether Wal-Mart’s Code of Conduct Creates a Contractual Obligation Between Wal-Mart and the Employ of its Foreign Suppliers Northwestern Journal of International Law & Business, Winter2007, Vol. 27 Issue 2, p453-473, 21p; EBSCOhost 12 June 2009 Sobel, Russell S.; Dean, Andrea M. has Wal-Mart buried Mom and Pop? the Impact of Wal-Mart on self-employment and Small Establishments in the United States. Economic Inquiry, Oct2008, Vol. 46 Issue 4, p676-695, 20p, EBSCOhost 12 June 2009 Fishman, Charles. The Wal-Mart Effect and a Decent Society: Who Knew Shopping Was So Important? Academy of Management Perspectives, Aug2006, Vol. 20 Issue 3, p6-25, 20p; EBSCOhost 12 June 2009 Goetz, Stephan J.; Rupasingha, Anil. Wal-Mart and Social capital American Journal of Agricultural Economics, Dec2006, Vol. 88 Issue 5, p1304-1310, 7p, EBSCOhost 12 June 2009 Freeman, R. Edward. The Wal-mart Effect and Business Ethics and Society. . Academy of Management Perspectives, Aug2006, Vol. 20 Issue 3, p38-40, 3p; EBSCOhost 12 June 2009 AHIMA. Defines Personal Health Record. Preview hfm Healthcare Financial Management, Sep2005, Vol. 59 Issue 9, p30-30, 1/4p; EBSCOhost 12 June 2009 George S. Day. The Capabilities of Market-Driven Organizations: The Journal of Marketing, Vol. 58, No. 4 Oct., 1994, pp. 37-52 Published by: American Marketing Association Stable Read More